Food Price Inflation in India

Over the next forty years, global population is expected to reach nine billion people. This increase in population, combined with expected economic growth, will cause an increase in food demanded and inevitably drain the resources we use for food production. So far, agriculture has been able to respond positively to the rising demand for crop and livestock products. However, farmers are already faced with many new challenges associated with feeding an expanding global population. Farmers must now meet strict new emissions requirements and produce more food on fewer acres while minimizing their environmental footprint. The demand for food is expected to grow substantially in the next couple decades. Some of the factors affecting an increase in food demands are population growth, rising incomes of individuals, food supply factors, and biofuels.

According to the Federal Reserve Bank of San Francisco (2002), inflation can be defined as the increase in the level of prices and a decrease in the purchasing power of money. In short, money loses its value due to the increase of the prices of goods and services. Products that can experience this are food, clothing, electronics, raw materials, and more. The reasons for these occurrences are complex since there are two types of inflation, and each has its respective causes.

The CPI is a price index of a market basket of items that consumers buy. A market basket is a collection of items that people often buy such as clothing, gasoline, food, and so forth.

Consumer Price Index, is a measure of the overall cost of goods and services bought by a typical consumer. A 10% increase in chicken will have a greater affect on the CPI because more people typically by chicken than those who buy caviar.

Inflation is the sustained increase in the general level of prices for goods and services in a county, and is measured as an annual percentage change. (Investopedia) During periods of inflation, the prices of products and services will rise. There are several reasons why an economy would see a rise in inflation. Decrease in supplies, corporate deciding to charge more, and consumer confidence are some of the reasons why an economy would see the inflation rate increase. Consumer confidence is when consumers gain more confidence in spending due to a low unemployment rate and wages being stable. Decrease in supplies is when consumers are willing to pay more for a product or service is that is slowly becoming unavailable due to a decrease in supplies. Corporate decisions are when the corporations basically decide

Inflation describes the increases in the average price and deflation is the decrease of the average price. Both inflation and deflation are the percentage rate that changes the price index and hurts the value of real money. Inflation is an increase in the general price of goods and services over a period of time. Unexpected inflation benefits the borrowers and hurts the lenders. Inflation is the reduction in purchase power. Inflation affects the value of money. Inflation or deflation is the percentage change of price index, once these calculations take effect we can use the (CPI) consumer price index and is widely used in the United States to level out price changes. Normal values are converted to real values by dividing the price index.

Inflation occurs when the general price level of goods and services have increased in a period of time. It is a measurement that signals the current economic situations and whether there is a potential economic growth.

Also, the consumer price index measurements can be used to forecast the future economic prices. Hence, the company will use the suitable environment to achieve its goal of maximizing profits and also minimizing the costs.

Food price rises have been affecting the whole world. However the United States has been one of the countries that has been majorly affected. A major cause of the food price rise has been the drought affecting California, the state that produces the most crops for the nation. Watering fields of crops require massive amounts of water that California simply does not have, for example, according to Upfront Magazine three mandarin oranges require as much as 42.5 gallons of water and a bunch of grapes requires about 24 gallons. California governor Jerry Brown has ordered a reduction of water use of its residents by 25%, hoping that this cutback will prevent the drought from worsening. Aside from residents being required to reduce the amount of water

The Consumer Price Index (CPI) is collected by the Bureau of Labor Statistics. The BLS adjusts the market basket periodically to reflect changes in the consumer's buying behavior. In addition, the prices of individual items in the CPI rise and fall with the impact of supply and demand. Showing in Table 2 due to the recession, the CPI decreased drastically. To illustrate this, in other words, when supply is abundant, prices go down. However, when supply decreases, prices rise and even skyrocket. In the same way, the demand for products influences their prices. The increase in demand will increase prices upwards. BLS statistics record these prices, selecting a certain year and then measure the changes in the price of the items in the market basket

Variations purposefully have effects on the purchasing power by reducing currency values. The central banking system in the United States known as the Federal Reserve monitors inflation via the consumer price index as well as the producer price index. The United States Department of Labor also keeps a watchful eye on economic inflation. Their measuring criteria includes; consumer price indexes for the United States and other countries, producer price indexes, import and export pricing, employment trends, contract escalations and price and index number research (United States Department of Labor).

When people think of oil, they think about the stuff you put in your car or what you use in food. Oil is so much more than that. Oil is fuel, gas and energy that we use and need in life. So we ask, why does the price of oil change so much and why does that price change affect the price of our food? Oil has such a large demand because we are dependent on it for so many things like transporting resources, running equipment, heating our houses, making our roads and many other things we use on an everyday basis (Westhoff).

According to Mankiw the Consumer Price Index is a measure of the overall cost of the goods and services bought by a typical consumer. The Department of Labor’s subordinate branch the Bureau of Labor who is in charge of providing the Consumer Price Index of states that the Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a “market basket” of consumer goods and services.

Inflation is the decline in purchasing power of the monetary unit. It is a common sense that money’s worth changes over time due to inflation. If there is an element of inflation then it is necessary to adjust the values by the given rates for inflation. Inflation is not considered important in the decision making process when it is low but it is important to include the factor when it rises let say 10 %.

The price index, sometimes referred as cost-of-living index used data of prices and quantity of goods consumed to calculate and compared change in price overtime. The key is to find the amount of spendings that could maintain the same welfare.(First) In Laspeyres price index, the fixed basket of goods is used to keep consumer welfare constant.(BLS) However, the fixed basket experiences several biases and overstates the rise in prices about 0.2 to 0.25 percentage points per year when compared with other superative index that adjust basket while trying to maintain similar welfare to consumer. The examples of the indexes are Fisher ideal price index or Tornqvist