Have you heard of food inflation in India? Here is all you need to know.

Discover the secret behind the price surges of your kitchen essentials.
We were all witnesses to the recent story of prices of tomatoes surging beyond imagination. This everyday household vegetable was suddenly under the premium category.
One kilogram of tomato that cost between ₹ 20 to ₹ 30 in January 2023 increased to more than ₹ 160 in July 2023, across many states in India.
There are numerous examples of how the prices of regular food products have skyrocketed abruptly. If you are one of those trying to decode the rationale behind this phenomenon, food inflation is your answer.
What is food inflation?

Inflation is an economic condition where the prices of goods and services increase, suggesting a decrease in the value of money.
For example, a pencil available for ₹ 10 in 2010 costs ₹ 40 today. So, the consumer has to spend 4x the price now to buy the same pencil.
This situation, where a consumer has to spend more money for the same quantity of goods, is called inflation.
Now, replace the pencil with rice in the above example. When such price rises happen on food products, it is called food inflation.
BUT WHY DID WE HAVE FOOD INFLATION IN THE FIRST PLACE?
Causes of food inflation in India
India is the most populous country in the world today. This is an obvious indication of the high requirement for food in the country. So, food inflation in a situation like this is a severe economic crisis.
Owing to multiple uncertainties in the economy and the failure of a few government strategies, India is currently witnessing an all-time high inflation rate in recent times.
As per the report by CRISIL (Credit Rating Information Services of India Limited), the food inflation rate contributes up to 39% to the overall consumer price index.
The food inflation in India reached around 11.5% in July 2023, the highest in the last three years. Vegetable crops have seen the maximum rise, followed by cereals and pulses.
Reasons for food inflation in India
- The El Nino effect
This is one of the main culprits behind the food inflation in India. El Nino is a weather impact where the waters of the Pacific Ocean warm up and reduce the rainfall in India.
2023 has not been a rewarding year for the farmers due to this. The weather conditions have been unfavourable from the start of the year. Irregular and unseasonal rains on one hand, and extreme heat for a long time on the other, have significantly contributed to the decline in the production of crops. Both the rabi and kharif crops have taken a hit due to the unpredictable weather. (Rabi crops – Grown after monsoon, Kharif crops – Grown at the start of monsoon).
- The supply shock
A supply shock is where sudden events lead to changes in quantities supplied, thereby impacting the prices.
With an already existing problem of a poor rabi season, the Russia-Ukraine war added to the issue. These impacted the supply of cereals available within the country. It is also said that the government did not interfere at the right time to take control of rising prices. Since the government intervened much later, the result of export bans has not been as effective.
In fact, the government claimed an all-time high production of wheat in 2022 and 2023. With a ban on exports, there should have been a sufficient supply of wheat at affordable prices. However, the government was still not able to procure the required quantity. Hence, to fund its free food programme, the government sold the wheat in its reserves at low prices and brought the inflation rate of wheat near 9% in August 2023.
- Rice Exports at low prices
An agricultural economist, Ashok Gulati hinted that the rice given for free to consumers as part of their ration, was being exported at prices less than the Minimum Support Price (MSP). This, according to him is one of the reasons for the increasing domestic price of rice.
Government measures to control food inflation in India
A senior official from the Union Finance Ministry suggested that the food inflation rate may plateau going forward. With the measures taken by the government and the Reserve Bank of India, the official expects the inflation to stay under control in the months to come
- Ban on exports
The government announced a ban on exporting wheat in May 2022. It also imposed a stock holding limit of 3,000 tonnes on wholesalers and 10 tonnes on retailers.
In July 2023, the government imposed another ban on the export of non-basmati rice.
- Increasing export duty
There has been a constant rise in the prices of onions, too. So, to increase the supply of onions domestically and cut down the exports, the government has imposed a duty of 40% on onion exports.
These government interventions have resulted in a slight decrease in food inflation to 9.9% https://www.businesstoday.in/latest/economy/story/august-retail-inflation-eases-to-683-from-744-in-july-iip-grows-at-57-in-july-398100-2023-09-12 in August compared to July 2023.
Conclusion
Nutritious food is already an extravagance for 74.1% of Indians, based on a report published by multiple global organisations. So, controlling food inflation is critical before it turns disastrous.
The brunt of food inflation on consumers is not just on their plates but on their entire lifestyle. With rising prices of food, consumers are having to change their spending patterns.
The drastic change in prices of food products has not only been heavy on individual consumers’ pockets but also on food chains like McDonald’s and Burger King, who eliminated tomatoes from their menu
DISCLAIMER: This article is not meant to be giving financial advice. Please seek a registered financial advisor for any investments.
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