128 : Inflation in India: An Empirical Analysis
Pratima Singh
10 May 2011
High inflation in India
has become a major
issue with both
academ
ics and policy
makers
. It is
one of the big
gest hindrances to growth and
a major
policy
challenge
for
incumbent
governments
. This paper analyses
trends in infl
ation over the past five years,
particularly
food inflation, and examines the demand and supply side
factors
behind
surging food prices
.
It
argues that
demand for
several
food
items
in India
exceeds
their
current
suppl
ies
,
and
leads to high
p
rices. It
further contends that this demand
-
supply imbalance
is
attributable
to
structu
ral inefficiencies
,
including
distribution
of food products.
Pointing out that monetary
policy
responses are unlikely to prove effective in reducing food prices, the
paper emphasises
on the importance of increasing agricultural productivity and reforming retail trade policies
for long
-
term results.