Persistent Food Inflation in India: Structural Failures in Market Management, Impacts on the Poor, and the Case for CPI Weightage Revision.....

Introduction

Food prices in India have remained stubbornly volatile and elevated despite repeated government interventions, posing a chronic challenge since independence but particularly acute since 2014 under successive NDA governments. Food and beverages constitute a dominant share of household budgets, especially for the poor, making inflation in this segment a direct determinant of living standards, poverty, and real wages. This essay examines why successive governments have failed to tame food prices, what this reveals about the management of India's food markets, the cumulative food inflation since 2014 (approximately 65-75% rise in prices), its implications for the poor's food consumption propensity and real wages, and whether these findings justify the sharp reduction in food weightage in the new Consumer Price Index (CPI) series with base year 2024 (based on 2023-24 Household Consumption Expenditure Survey, or HCES—close to the query's reference to 2023). Drawing on official data from the Ministry of Statistics and Programme Implementation (MOSPI), Labour Bureau, and economic analyses, the discussion underscores structural deficiencies that monetary and fiscal tools alone cannot resolve.

Why the Government Struggles to Control Food Prices and Implications for Food Market Management

The Indian government's inability to stabilize food prices stems from a mix of supply-side vulnerabilities, policy inconsistencies, and deep-rooted market fragmentation—issues persisting across administrations. Agriculture, contributing ~15-18% to GDP but employing ~45% of the workforce, remains heavily rain-fed: over 50% of net sown area depends on monsoons, leading to output shocks from erratic rainfall, heatwaves, and unseasonal events. For instance, 2022-24 saw vegetable and cereal spikes due to climate anomalies, pushing food inflation above 8% in peaks despite record buffer stocks. Supply chain inefficiencies exacerbate this: post-harvest losses for perishables (fruits, vegetables, milk) range 20-40% due to inadequate cold storage (only ~10% of required capacity) and poor logistics, with fragmented markets dominated by middlemen under the Agricultural Produce Market Committee (APMC) system inflating retail prices by 30-50% over farm-gate levels.

Policy responses—Minimum Support Price (MSP) for 23 crops, export bans (e.g., wheat 2022, non-basmati rice 2023), subsidies via PM-KISAN and PMFBY, and open market sales—have been ad-hoc and often counterproductive. MSP distorts cropping patterns toward rice/wheat (ignoring pulses/oilseeds, where import dependence exceeds 60%), while export curbs signal unreliability to global markets, discouraging private investment. Hoarding by traders, enabled by weak enforcement of Essential Commodities Act amendments, and global spillovers (e.g., edible oil/pulse price surges) further limit control. Monetary policy via RBI's inflation targeting (4% ±2%) is blunt for supply-driven food shocks, which account for 60-70% of CPI volatility.

This chronic failure reveals profound weaknesses in food market management: a highly fragmented, unorganized sector with smallholder dominance (average holding <1 ha), minimal value addition, and absent integration between production, storage, processing, and retail. Unlike efficient markets in the US or China (with contract farming and futures hedging), India's lacks scale, technology adoption (e.g., drip irrigation covers <10% area), and competition. Public distribution system (PDS) leaks (20-30%) and free foodgrain schemes (covering 80 crore under PMGKAY) mask but do not resolve underlying production and distribution inefficiencies. Overall, it signals policy paralysis favoring short-term populism over long-term structural reforms like agri-market liberalization (e.g., full implementation of farm laws repealed in 2021), massive infra investment (only 0.5-1% GDP on agri-logistics), and climate-resilient varieties. Without these, food prices remain a "persistent problem," undermining economic stability.

Cumulative Food Inflation Since 2014: Data and Calculation

Since April 2014 (when CPI became the official inflation measure with base 2012=100), food inflation—tracked via Consumer Food Price Index (CFPI)—has averaged 5.5-5.7% annually (per Trading Economics and MOSPI data from 2012-2026, with similar trends post-2014). Volatility is high: peaks of 9-14% during 2016-17 (pulses crisis) and 2022-23 (post-COVID and Ukraine war), dips to negative in late 2025 (-2.71% in Dec 2025 due to base effects and bumper harvests).To compute cumulative: Using compound growth, with average annual 5.7% over 11.5 years (mid-2014 to end-2025), the multiplier is (1.057)^11.5 ≈ 1.88, implying ~88% cumulative rise. More conservatively, aligning with MOSPI CFPI index trends (approximating from press releases: ~120-130 index in 2014 vs. ~195-205 by late 2025 on old base), the increase is 60-70%. For essentials: one analysis notes ~50% rise in key food items 2015-2022 alone; extending to 2025 with 7.3% avg FY2024-25 food inflation adds further. Official back-series for new CPI confirms food prices rose faster than non-food in most years, outpacing headline CPI (avg 4.5-5.5%). By Jan 2026 (new base 2024=100), CFPI stood at ~104, but linking factors show sustained erosion of purchasing power.

Implications for Poor's Food Consumption Propensity, Real Wages, and Broader Economy

High cumulative food inflation disproportionately burdens the poor, who allocate 50-60%+ of expenditure to food (Engel's law: higher for lower quintiles; rural poorest ~55-60% vs. national average declining to 47% rural/40% urban per HCES 2023-24). Propensity to consume food (marginal propensity) remains near 0.6-0.7 for bottom 40% deciles, meaning income gains are largely food-absorbed rather than saved/invested. This perpetuates nutritional insecurity: despite free grains, protein/fat/vitamin intake stagnates, with 35%+ children stunted (NFHS-5).Real wages have stagnated amid this. Labour Bureau Wage Rates in Rural India (WRRI) data show real rural wage growth <1% annually since 2014-15 (0.8% for male agri-labourers, near-zero for non-agri/construction; some periods negative). Nominal wages rose ~60% (e.g., rural male construction from ₹275/day in 2014-15 to ₹441 in 2024-25), but cumulative food inflation of 65-75% (plus overall CPI ~50-60%) eroded gains, yielding flat or declining real wages. Periodic Labour Force Survey corroborates: rural real daily earnings stagnant 2014-2023. For the poor (bottom 50 crore), this translates to squeezed budgets—higher food costs force cuts in quantity/quality, debt traps, or reduced non-food spending (health/education), deepening inequality and multidimensional poverty (despite MPI declines, food component lags). It also fuels wage-price spirals, as agri-wages (rising nominally) feed back into costs.Do Findings Support Reducing Food Weightage in New CPI (Base ~2023/2024)?The new CPI series (base 2024=100, from HCES 2023-24) slashes food & beverages weight from 45.86% (old 2012 series) to 36.75% (or 40.10% under comparable classification), with divisions at 36.75% combined. Housing/transport/misc rise correspondingly. Justification: Engel's law—rising incomes shift spending (rural food share fell 52.9% in 2011-12 to 47.04% in 2023-24; urban 42.62% to 39.68%), plus free grains reducing cash outlay. This aligns CPI with actual consumption, reduces volatility (food drives 60%+ of old CPI swings), and better reflects services economy for monetary policy.

However, findings on persistent food inflation and its regressive impact weakly support this reduction. For the poor (still ~47%+ food spend), lower weight understates their "true" inflation—e.g., during 2022 spikes, poor faced 1-2 pp higher effective inflation than headline. Real wages data shows erosion masked if CPI down weights food. Volatility persists (food averaged 5.7%, often exceeding headline), so reducing weight stabilizes macro indicators but risks policy complacency on agri-reforms. Partial support exists for representativeness and lower volatility aiding RBI targeting, but equity demands supplementary "food CPI" or higher weights for poverty lines/wage indexation. Data (70% cumulative rise vs. stagnant real wages) argues against over-reliance on reduced weight for vulnerable-group metrics.

India's inability to control food prices exposes systemic market mismanagement—supply fragility, infrastructural deficits, and policy short-termism—despite consistent political priority. Cumulative ~65-75% food inflation since 2014 has eroded real wages (near-zero growth) and strained the poor's high food propensity, entrenching vulnerability even as aggregate consumption shifts. The new CPI's food weight reduction (to ~37%) is data-driven and pragmatic for headline stability per HCES trends, yet the findings caution against it fully: persistent, regressive impacts demand complementary tools like targeted subsidies, agri-infra push (e.g., 2% GDP investment), market reforms, and dual CPIs. Without addressing root causes, food inflation will remain a drag on growth, equity, and welfare. Structural overhaul, not weight tweaks, is the imperative for sustainable price stability.