Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Rising food prices to fuel inflation again?
Fri, 27 Apr Pre-Open

Inflation has consistently been a problem for the Reserve Bank Of India (RBI) who can do little about it. Surging food prices were a key driver of headline inflation over the past year which only began to ease towards the end of 2011, in part due to the base effect from surging prices a year earlier and declining global and domestic food prices. As a result, inflation started to ease and the RBI cut benchmark interest rates by 50 basis points. However world food prices are on the rise again. After four months of consecutive price decline, world food prices increased by 8% from December 2011 to March 2012. This was due to higher oil prices, adverse weather conditions and Asia's strong demand for food imports.

India's consumer price-based food inflation (CPI) also rose to 8.22% in March from 6.62% in February 2012. India, which has the largest population living on less than USD $1.25 a day, has experienced significant increases in the price of food.

There are several factors (both domestic and global) that have contributed to the high food prices. First, there is lack of godowns to store food grains. Second, ineffective public distribution system (PDS) and Third, low food production. Currently only 30% of the food grain is being lifted from the market for PDS. Thus unless these structural issues gets sorted out, India will continue to battle high food prices. Though poor producers and net sellers of food benefit from higher food prices, most poor people, including all the urban poor, who typically spend more than 50% of their incomes on food, lose as very high food prices curtail their purchasing power.

Food inflation is likely to pinch Indians at least until July (when the monsoon sets in) as fruit and vegetable output shrinks, hurt by rising temperatures and a lack of water. At the same time, edible oil and pulses prices are rallying on lower production and a more expensive world market. Rising food prices will add to problems for the fractious coalition government, which has been weakened by a slew of scandals, and will make it difficult for the central bank to cut high interest rates, which are hindering growth.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Rising food prices to fuel inflation again?". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Agora Research Private Limited.

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Agora Research Private Limited (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.