Food Inflation and Agricultural Policy Reforms: Understanding the Impact on Essential Commodities
Food inflation in India has been a growing concern, directly affecting household expenses and making essential food items more expensive. The rising prices of staples like wheat, rice, pulses, vegetables, and dairy products have put immense pressure on consumers, particularly middle- and lower-income households. When food prices rise faster than income levels, people have to make difficult choices—sometimes cutting down on the quantity or quality of food they consume. This affects overall well-being and nutritional intake, particularly for vulnerable sections like children, the elderly, and daily wage earners.
Several factors contribute to food inflation, including unpredictable weather conditions, supply chain disruptions, and higher production costs. For example, erratic monsoons or prolonged droughts can reduce crop yields, causing shortages. Additionally, rising input costs—such as fertilizers, fuel, and labor—drive up the price at which farmers sell their produce, which is then passed on to consumers. The Reserve Bank of India (RBI) has recognized food inflation as a critical issue, as retail inflation has frequently crossed the 6% comfort level. This makes food affordability a pressing concern, influencing economic policies and prompting government interventions.
Staples Under Pressure: Wheat, Rice, and Pulses
One of the biggest concerns is the rising price of wheat, a staple food in most Indian households. Wheat is the foundation for many everyday foods—roti, bread, biscuits, and even pasta. A price increase directly impacts household budgets, especially in urban areas where people depend on store-bought flour. To counteract supply shortages and encourage farmers to produce more, the government has increased the Minimum Support Price (MSP) for wheat by 6.6%, raising it to ₹2,425 per 100 kg for the 2025 season. While this benefits farmers by ensuring better earnings, it also raises the cost of wheat-based products for consumers, as flour mills and bakeries adjust their prices accordingly.
Rice, another essential staple, has also seen price fluctuations, primarily due to export restrictions on non-basmati rice. The government has imposed these restrictions to ensure sufficient domestic supply, particularly after erratic weather affected paddy production. However, these restrictions have sparked concerns in international markets, as India is a leading exporter of rice. Countries that depend on Indian rice, such as Bangladesh, UAE, and several African nations, have had to look for alternative suppliers, sometimes at higher costs.
Pulses, particularly tur (arhar dal) and urad dal, have also experienced shortages, leading to a spike in prices. Pulses are a crucial protein source for vegetarians in India, and any price rise directly impacts daily nutrition. To address this, the government has taken multiple steps, including increasing imports from countries like Myanmar and Tanzania and offering subsidies to encourage more domestic production. However, pulses have a longer growth cycle, meaning that prices may remain high for some time before supply stabilizes.
Vegetables and Dairy: Volatile Prices and Supply Shocks
Vegetable prices, particularly onions and tomatoes, have been highly volatile due to erratic weather conditions. In 2023, onion prices skyrocketed after heavy rains in Maharashtra, the largest onion-producing state, destroyed a significant portion of the crop. Similarly, tomato prices surged past ₹200 per kg in 2022, when unseasonal rainfall led to crop damage. These price spikes force consumers to reduce consumption or seek alternatives, impacting nutrition.
The government often intervenes by releasing buffer stocks—reserved quantities stored for emergencies—and imposing temporary export bans to ensure that domestic markets are well-supplied. While these measures provide short-term relief, they do not eliminate the underlying issue of climate vulnerability. A long-term solution would be investing in climate-resilient farming techniques, such as drip irrigation, protected greenhouses, and better storage infrastructure to reduce crop losses.
Dairy products, including milk, butter, and cheese, have also become costlier. The rise in fodder prices and transportation costs has pushed up production expenses for dairy farmers. Milk is a daily necessity for millions, particularly children, making its price a politically sensitive issue. The government has responded by expanding credit access to dairy farmers and offering financial assistance to ensure stable production. However, with rising fuel prices affecting transportation, the cost of dairy is likely to remain high in the near future.
Cooking Oils and Packaged Goods: The Impact of Imports and Supply Chains
India is heavily reliant on imported edible oils, including palm oil, soybean oil, and sunflower oil. When global supply chains are disrupted—such as during the Russia-Ukraine war, which affected sunflower oil exports—India faces immediate price increases. Since cooking oil is a basic necessity for preparing almost every meal, inflation in this sector has a widespread impact.
Higher cooking oil prices also affect packaged goods like chips, biscuits, and fried snacks, making everyday grocery shopping more expensive. To manage this, the government has reduced import duties on edible oils to make them cheaper for consumers and encouraged domestic oilseed production through incentives. However, developing self-sufficiency in oilseed production is a long-term process, and fluctuations in global markets will continue to affect prices for the foreseeable future.
Government Actions and Future Outlook
To tackle food inflation, the government is implementing both short-term and long-term strategies.
Short-term measures include:
- Buffer stock releases: Supplying stored food grains like wheat and rice to the market to stabilize prices.
- Export restrictions: Limiting exports of essential commodities to ensure domestic availability.
- MSP hikes: Increasing minimum prices paid to farmers to encourage production and prevent shortages.
- Collateral-free loans: Raising credit limits for farmers to help them afford rising input costs.
While these steps help manage inflation temporarily, they can also have unintended consequences. For instance, higher MSPs can push up consumer prices, while export bans can disrupt international trade relationships.
Long-term structural reforms are necessary for a sustainable solution. These include:
- Investing in cold storage and better transport infrastructure to reduce post-harvest losses.
- Promoting crop diversification to prevent over-reliance on a few staple crops.
- Encouraging climate-resilient agriculture to mitigate the impact of unpredictable weather on food production.
However, food inflation remains a persistent risk, particularly with the increasing unpredictability of climate change, global supply chain disruptions, and geopolitical tensions. While government interventions aim to protect both farmers and consumers, their effectiveness will depend on how well they are implemented and how markets respond.
Until these measures start showing tangible results, essential food items will continue to be at the center of India’s economic and public policy discussions, affecting millions of households across the country.