Food Price Levels and Volatility: Sources, Impact and Implications

Food inflation in India for the past few years has been at an historic high. Higher food prices have especially hurt those who spend most of their income on food and have not necessarily been helpful to smallholder farmers in terms of increased supply response. The volatility of food prices at the wholesale and retail levels has also increased, and this creates uncertainties for consumers and producers that need to be managed. This article reviews some of the sources of food price increases and volatility (especially over the period 2008–10 when inflation was high) and draws out implications for Indian citizens.