Impact of Volatile Food Prices on Inflation and Economic Growth

February’s Consumer Price Index (CPI) Data

  • Headline CPI remains steady at 5.09%, but food prices
  • Consumer Food Price Index shows a notable increase to 66%, highlighting food inflation.



Concerns Over Vegetable Prices

  • Vegetable prices, particularly potatoes, onions, and tomatoes, witness significant
  • Potato prices shift from deflation to 12.4% inflation, onions surge by 22.1%, and tomatoes reach a six- month high of 42%



Supply Side Measures’ Impact

  • Government’s measures, like the ban on onion exports, fail to curb rising
  • Agriculture Ministry’s estimates suggest a decrease in onion and potato production, adding to inflationary



Challenges Ahead

  • Water storage levels across reservoirs are below average, indicating potential challenges for summer-sown crops, particularly in the southern
  • RBIDeputy Governor warns that high food inflation is hindering private consumption, essential

for economic



Policy Implications

  • Policymakers face the challenge of curbing inflation to ensure inclusive and sustained economic
  • The looming elections add urgency to addressing food inflation concerns to prevent social



Understanding Inflation Definition of Inflation

  • Inflation refers to the sustained increase in the general price level of goods and services in an economy over a period of
  • It is typically measured using indices such as the Consumer Price Index (CPI) or the Wholesale Price Index (WPI).



Causes of Inflation Demand-Pull Inflation:

Occurs when aggregate demand exceeds aggregate supply, leading to increased demand for goods and

services, thereby driving prices up.

Cost-Push Inflation:

Arises when the cost of production increases, such as due to higher wages or input costs, leading producers to pass on the higher costs to consumers.

Built-In Inflation:

Results from expectations of future inflation, leading workers to demand higher wages and businesses to increase prices to maintain profit margins.

Types of Inflation

Moderate Inflation:

Refers to a steady and manageable increase in prices, typically targeted by central banks to support economic growth.


Characterized by extremely rapid and out-of-control price increases, often leading to the

breakdown of the monetary system and severe economic disruptions.


Occurs when high inflation coincides with stagnant economic growth and high unemployment rates, posing significant challenges for policymakers.

Effects of Inflation

  • Redistribution of Income: Inflation can lead to a redistribution of income and wealth, benefiting debtors at the expense of
  • Uncertainty: High and unpredictable inflation can create uncertainty in the economy, affecting investment decisions and economic
  • Fixed-Income Groups: Fixed-income groups, such as pensioners and savers, may experience a decline in real purchasing power as the value of money
  • InternationalCompetitiveness: Persistent inflation can erode a country’s international competitiveness as domestic prices rise relative to those of trading



Measures to Control Inflation Monetary Policy:

Central banks use tools such as interest rate adjustments, open market operations, and reserve requirements to influence the money supply and control inflation.

Fiscal Policy:

Governments can use taxation and public spending policies to manage aggregate demand and control inflationary pressures.

Supply-Side Policies:

Measures aimed at increasing the efficiency and productivity of the economy, such as investment in infrastructure and education, can help alleviate supply constraints and reduce inflationary pressures.



Inflation Targeting

  • Many central banks adopt inflation targeting as a monetary policy framework, setting explicit targets for inflation and adjusting policy instruments to achieve them.
  • The Reserve Bank of India (RBI) also follows a flexible inflation targeting framework,aiming to maintain consumer price inflation within a target range while supporting economic



Global Perspectives

  • Inflation trends and policies in major economies, such as the United States, European Union, and China, can have significant implications for the global economy and financial
  • Understanding global inflation dynamics and policy responses is essential for assessing India’s position in the international economic


Celebrating 75 Years of Diplomatic Relations:

  • Patrick’s Day 2024 marks 75 years of diplomatic relations between Ireland and India.
  • The article highlights the historical partnership between Ireland and India during their struggles for
  • It emphasizes the growth of trade, education, and people-to people connections between the two countries over the years.

Stand on Conflicts:

  • Ireland expresses concerns about ongoing conflicts worldwide, including Russia’s actions in Ukraine and Hamas’s attacks on
  • Ireland supports Ukraine’s path to European Union membership and calls for accountability in conflicts
  • It advocates for upholding international humanitarian law and providing assistance to civilians affected by conflicts

A Young Talent Pool:

  • The article emphasizes the importance of young people in addressing global challenges, such as climate change and human rights.
  • Ireland highlights its economic strength and attractive environment for investment, trade, and study, particularly for young entrepreneurs and students.
  • It reflects on Ireland’s domestic and international challenges and its commitment to progress, peace, and equality.

The Indian Link:

  • Ireland values the contribution of Indian students and residents to its society, particularly in sectors like IT   and healthcare.
  • The article underscores the strong bilateral relationship between Ireland and India, rooted in historical partnerships and shared values.
  • It emphasizes the importance of supporting and building enduring partnerships between nations.


St. Patrick’s Day 2024 serves as a reminder of the deepening ties between Ireland and                                           India and the importance of collaboration in addressing global challenges.