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December 19, 2024

Time for structural strike on inflation

Slower food output growth calls for more fiscal policy measures, reforms

Crisil Insight
  • Inflation has stayed elevated this fiscal, after rising sharply for major food crops during fiscals 2021 to 2024. The average food inflation rate during the period doubled compared with fiscals 2017 to 2020, coinciding with a slowdown in food production growth
  • Weather shocks seem to be the prime factor behind slower yield and production growth
  • Elevated global food prices impacted the domestic prices of majorly traded crops, such as rice, wheat, maize and edible oils. Geopolitical uncertainty and adverse weather conditions hit supplies at various times during the period. The global food price index rose 9.5% between fiscals 2021 to 2024, compared with 0.7% between fiscals 2017 with 2020
  • While fiscal policy has been proactive in taming short-term fluctuations in food prices by managing food supplies, it needs to double down on long-term easing of food inflation, by supporting agriculture productivity, production and supplies
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