Inflation

Inflation

Subject: Economy

Section: Inflation

Context:

The world and India are witnessing a resurgence of food inflation. And with the UN Food and Agriculture Organization’s (FAO) food price index hitting new highs, it has reignited memories of the last great commodity inflation (from the mid-2000s till around 2012-13, briefly interrupted by the 2008-09 financial crisis).

Concept :

Differences between the two:

• The former was a structural, demand-led inflation, driven by rising incomes and relayed dietary diversification of protein rich items i.e. the protein inflation.
• Later is supply side and calorie led inflation. The Demand-pull from rising incomes isn’t strong enough and protein inflation is muted.

Concept:

Protein Inflation, a subset of food inflation,. It is defined as increase in price and demand of milk and milk products, eggs, meat, fish, edible oils, dairy and poultry products i.e. protein yielding items. It was coined by the former Reserve Bank of

India deputy governor Subir Gokarn

Calorie Inflation- a subset of food inflation. It is defined as an increase in price and demand of vegetable oil, cereals and sugar i.e. calorie yielding items.

Working:

Real incomes going up results in declining per capita consumption of cereals and sugar (which basically deliver calories) alongside growing demand for foods incorporating proteins (milk, pulses, egg, fish and meat).