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Reply #16


Response to Tansy_Gold (Original post)

Fri Nov 22, 2013, 08:47 AM

16. Here's Why India Has The Worst Food Inflation Problem In The World

http://www.businessinsider.com/why-india-food-inflation-is-high-2013-11

Nowhere in the world have we seen prices surge more violently than in India.
"The recently released WPI for October 2013 shows India’s food inflation jumped by 18.2% yoy, the fifth straight month of double-digit inflation," noted Societe Generale's Kunal Kundu.

Food price fluctuations are usually a function of supply, which is often linked to natural forces, and demand, which is often linked to changing tastes.


Societe Generale
It's only going up.

In India, however, food price inflation is tied to dysfunctional government policy. Kundu explains:
An important contributor to this is high and rising MSPs (Minimum Support Price). The MSP is used as a tool to incentivise farmers to produce food grain and help them during periods of crop failure. However, like all other social sector spending, it has become a tool to appease farmers as their votes influence the final election outcome. While MSPs are supposed to be used as a tool to compensate farmers in particular during periods of stress like dough and/or flood (which means that during normal periods, MSPs ought to be lowered or even suspended), in reality MSPs in India have always moved in one direction, up!



Read more: http://www.businessinsider.com/why-india-food-inflation-is-high-2013-11#ixzz2lNkOHMLB

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