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Prohibitive price gains: On the Consumer Food Price Index

  • Published
    15th Jan, 2024

Context:

Increasing food prices could further impact the already subdued consumption of goods.

Inflationary Trends in December

  • Consumer Price Index: December witnessed a four-month high in inflation measured by the Consumer Price Index.
  • Food Price Acceleration: Consumer Food Price Index saw an 83 basis points acceleration in December, with cereals being a major contributor.
  • Cereal Inflation: Cereal inflation, led by staples like rice and wheat, remained high at 9.93%, causing concerns for households.

Concerns in Food Price Dynamics

  • Rural Impact: Coarse cereals like jowar and bajra, crucial in rural areas, experienced accelerated month-on-month inflation, impacting vulnerable households.
  • Pulses Inflation: Pulses, a key protein source for vegetarians, reached a 43-month high at 20.7%, with concerns about future prices due to lower sowing.
  • Vegetable Price Volatility: Vegetable prices, led by tomatoes and onions, surged year-on-year but witnessed sequential deflation, showcasing their inherent volatility.

Challenges for Policymakers and Economic Impact

  • Continued Price Challenges: Despite some deflation in specific items, overall food prices remained higher, posing challenges for policymakers.
  • Impact on Household Spending: As food costs rise, households may allocate more income to necessities, potentially derailing the economy's weak consumption.
  • Global Uncertainties: The escalating crisis in West Asia introduces new uncertainties in global trade and energy costs, adding to policymakers' challenges.
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