IAS Economy Practice Question . 3

In the recent years, India has encountered successive bouts of high food inflation. What are the factors driving food inflation?
1. Shift in dietary habits towards protein foods
2. Large increases in Minimum Support Prices of foodgrains
3. Shocks from global food inflation
4. Successive years with poor monsoon since 2000
Choose the correct option:
[A]Only 1 & 2
[B]Only 1, 2 & 3
[C]Only 1 & 4
[D]1, 2 , 3 & 4

Answer: Only 1, 2 & 3
Let me first clarify that rainfall was deficient in 2009, but so was it in 2002 and 2004. So statement 4 is NOT a correct statement. In the earlier years, food inflation remained modest, at less than three per cent over three successive years during 2002-05 whereas it shot up to double digits in 2009. The driving forces are : (i) shift in dietary habits towards protein foods; (ii) pressure stemming from inclusive growth policies; (iii) large increases in MSPs of foodgrains; (iv) shocks from global food inflation; and (v) financialisation of commodities.

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