India’s foodgrain rations kept millions of people from falling into extreme poverty during the pandemic. Now, as the government considers whether or not to extend the scheme for the sixth time, it must factor in India’s complex food inflation problem.
India’s poor spend more than 40 percent of their incomes on food, compared with 36 percent for welfare-dependent households in Australia, and 27 percent for those on the lowest incomes in the US. For these groups, sustained increases in food prices mean a rise in both hunger and poverty. While the period before the pandemic saw exceptionally low food inflation in India, the pandemic induced increase in food insecurity has not waned since lockdowns ended. In recent months, this has been further exacerbated by food and fuel price inflation.
Wholesale and consumer prices indices measure the changes in prices in relation to a reference year. These are estimated based on price data for a representative consumption basket and give a break up of prices for food and non-food commodities. As such, the inflation rate gives the rate of increase in prices compared to the same month in the previous year. The food index within India’s wholesale price index (WPI) increased on an average by 10 percent since the beginning of 2022, reaching a peak of 12.4 percent in June 2022.
