Inflation in the cereal category is causing worry among economists as the prices of staple cereals such as rice and wheat continue to surge, hitting a high of 16.1% in January, up from 13.7% in December. The impact of this increase is significant, given that these cereals are the dietary staple for a majority of Indians.
In addition to the spike in cereal prices, the cost of milk, eggs, and protein has also shot up, leading to a 6.2% increase in food and beverage inflation. Overall inflation rose to a three-month high of 6.52%, above the central bank’s comfort band of 2%-6%, raising the prospects of further interest rate hikes.
The rise in prices of essential food items is likely to have a disproportionate impact on low-income households, particularly those residing in rural areas. These households often have low disposable incomes, and the increase in wages has not kept pace with the rising inflation, making it difficult for them to make ends meet.
The current inflationary trends are a cause for concern, and the government must take proactive steps to ease the pressure on low-income households and keep inflation under check. Several measures can be taken to address the issue, such as promoting the cultivation of cereals to reduce dependence on imports and improving supply chain management to prevent hoarding and black marketing.
The government can also consider providing direct support to the affected households in the form of cash transfers, subsidies, and other welfare schemes. These measures can help provide much-needed relief to low-income families, who are bearing the brunt of rising food prices.
Moreover, the government should also focus on increasing agricultural productivity and improving the rural economy to reduce the vulnerability of households to inflation. This could involve investing in infrastructure, increasing access to credit, and providing better market linkages for farmers.
Even so, inflation in the food category remains worrying. “Other food items are also showing a pick-up in prices such as proteins (meat, fish, eggs and milk) and pulses, while vegetable prices continue to decline,” said Gaura Sen Gupta, an economist at IDFC First Bank Economics Research.
“The three-month moving average inflation rates for items like biscuits, bread, refined flour, and semolina have been substantially higher than their latest 3-year average inflation rates,” said Nim. “Cereal inflation, in short, has become broad-based, which is concerning.”
It is essential to take a holistic approach to address the issue of rising food inflation. This involves taking measures to increase the supply of essential food items, support vulnerable households, and strengthen the rural economy. Failure to do so could have long-lasting consequences on the health and well-being of millions of Indians, particularly those in low-income households.
The sharp rise in cereal inflation and food and beverage inflation is a significant cause for concern, and the government must take urgent measures to ease the pressure on vulnerable households. It is essential to address the issue holistically, by improving supply chain management, increasing agricultural productivity, and providing direct support to the affected households. By taking prompt and decisive action, the government can mitigate the impact of inflation and ensure that essential food items remain affordable for all.
