why rising food prices might be here to stay

None of the standard explanations quite explain the rise in food prices India has seen: pronounced since 2006 and alarming after 2010. Drought and poor rains? The country has seen good aggregate rainfall in most of those years. Spike in global prices? Those were high in 2007-08, not now. Fragmented value chains that allow middlemen to grab large margins? The value chain has always been fragmented.

today’s et (PDF ETD_2014_08_19 why rising food prices could be here to stay) carries this story on the reasons for the persistent food inflation india is seeing since 2006. chalk it up to, i say, rising cost of cultivation, the concurrent rise of political control over mandis and the deepening of cartelisation there, and demand side changes (which range from changing diets to the falling rupee to supply shocks that our government inevitably fails to respond to).

for more on the trends mentioned in this story, see this story on ex agri minister sharad pawar and this interview with him. also see this 2011 story on why/how india’s farmlands are leaving agricultural use and its poorly understood implications for farm production. and this set done together — one on the crisis in india’s agricultural soils and the other on how dryland farming continues to be ignored by our policymakers. one reason soils are weakening is india’s dunderheaded fertiliser policy regime. on the market distortions, see this quick and dirty story on india’s many onion crises. and, on agri credit, see this: in the last ten or so years, agri credit has boomed. but output has not risen proportionately. where has the money gone?

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