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The Stubborn Food Inflation Problem
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Context
Recent concerns over persistent food inflation in India have highlighted the critical impact of climate change and weather shocks on agricultural production and prices.
Impact of Food Inflation
- Prolonged High Inflation: Inflation rates, particularly in food prices, have remained elevated for several months, exceeding RBI's tolerance band of 2-6%.
- Consumer Impact: Higher food prices disproportionately affect the bottom 20% of the population, impacting their purchasing power and living standards.
- Role of Food in Inflation Dynamics: Food prices not only influence overall inflation but also shape inflation expectations and wage pressures due to their significant weight in consumption baskets.
Factors Contributing to Food Inflation
- Weather Shocks: Climate change-induced weather extremes like heatwaves and unseasonal rains have disrupted crop cycles and production, exacerbating food inflation.
- Monsoon Dependency: Historically, the monsoon season has been crucial for food production, but unpredictability due to climate change has increased uncertainty.
- Impact on Agriculture: Climate change affects agriculture by depleting groundwater, increasing pest infestations, and disrupting traditional cropping patterns.
Policy Imperatives and Challenges
- Need for Climate-Resilient Agriculture: Policy intervention is crucial to promote climate-resistant crop varieties and enhance agricultural infrastructure.
- Role of Fiscal Policy: Investment in agricultural R&D, irrigation infrastructure, and cold storage facilities is essential to mitigate climate risks and reduce food wastage.
- Monetary Policy Limitations: While monetary policy can influence inflation, addressing structural issues like climate change impacts requires broader fiscal and policy interventions.
Mains Question:
Q. What are the challenges posed by climate change-induced weather shocks on food inflation in India? What are the policy measures needed to mitigate these challenges and ensure food security?
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