What we see in these times that the

food The major factors that I see in the inflation growth process is basically related to the net national income and their consumption practices; the comparison of normal consumption practices ranging from normal essential products like dal to extra wanted products like milk, fruit . Government minimum support prices to weather

conditions to increase in exports of grains etc. have also infected the inflation process to touch more height. 1)income facing growth but agriculture products (demands) going down. We notice

Farm productivity has lagged income growth Per capita net national Income has grown from Rs 24,095 in 2004-05 to Rs 43749 in 2009-10 , a compounded average annual growth rate of 13%. Agricultural productivity has lagged this rapid growth in incomes , growing less than 2% per annum for most of the last decade. The higher incomes have encouraged greater consumption of richer foods -- pulses, fruit and vegetables , milk and meat products. This has put pressure on prices. In the recent years, large transfers of purchasing power through the rural employment guarantee scheme have also added to demand pressure. Production strategies still focused on staples Our production is focused largely on basic food grain such as rice and wheat, demand for which is not so income elastic. The per capita availability of pulses has remained almost stagnant, while supply of fruit and vegetables , milk and meat prodcuts is falling short of demand. Not surprsing, at a given time prices of one or more of these is always rising sharply, keeping the overall inflation high. The relatively risk-free wheat and rice cultivation because of the government supported prices has discouraged cultivation of other market crops. High support prices create a floor for prices Minimum support prices (MSP), or the price for government purcahses, have increased sharply in recent years. Compouned average growth in wheat MSP in the last four years was about 15%. This year the increase was marginal, but that of winter pulses is up 20%. The economic costs of procurement for rice and wheat

have gone up by 40% and 36% since 2005-06 . These high prices set a floor on market prices. Seasonality in food prices not so stark The government had pitched its hopes on good monsoons to lower food prices, but over the past few years the relationship has weakened. Earlier, food prices dropped after monsoons, as winter crop arrived. But since 2005, there has been a secular rise in inflation regardless of the time of the year. Incidentally , Indian economy took off from 2004-05 , indicating that other drivers of inflation had become stronger than seasonal effects. Monetary intervention may not help Nearly every input into prodcuiton of farm goods from fertiliser to labour has seen a sharp escalation in prices. The key issue, however, is supply falling short of demand . In such a situation monetary policies will not help too much in bringing down food inflation.

India food exports to rise 12%