Food Inflation Set to Return

The past couple of months have seen prices of a host of farm commodities surge, mainly on the back of drought in large parts of western and southern India, coupled with an early and harsher-than-usual summer.

• Impact: Food inflation may benefit farmers as they will receive higher returns for their produce, whereas consumers will suffer as they will have to pay higher prices as compared to last year for the same food items.
• Food Inflation
  • The food and fuel inflation form one of the components of headline inflation in India.
  • Headline Inflation, as the name suggests, is the total inflation for the period, comprising a basket of commodities.
  • Core Inflation excludes volatile goods from the basket of commodities tracking Headline Inflation. These volatile commodities mainly comprise food and beverages (including vegetables) and fuel and light (crude oil).

Core inflation = Headline inflation – (Food and Fuel) inflation