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Critical Topics and Their Significance for the UPSC CSE Examination on October 03, 2024
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Surplus rains to help reduce food inflation, raise demand
For Preliminary Examination: Current events of national and international importance
For Mains Examination: GS III - Indian Economy
Context:
With Kharif crop sowing up 1.5% over last year’s levels by late September, and the healthy Southwest monsoon boosting reservoir levels as well as Rabi crop prospects, food inflation is expected to recede and rural demand is likely to see a steady rebound in the second half of 2024-25
Read about:
What is Inflation?
What is Food Inflation?
Key takeaways:
- With Kharif crop sowing 1.5% higher than last year's levels by late September, and the strong Southwest monsoon improving reservoir levels and boosting Rabi crop prospects, food inflation is expected to ease, leading to a steady recovery in rural demand during the second half of 2024-25.
- By September 30, the monsoon had brought an 8% surplus over the long-period average, with reservoir levels reaching 87% capacity as of September 26, according to Bank of Baroda economist Sonal Badhan.
- Except for the northern region, where reservoirs are at 68% of capacity compared to 86% last year, the rest of the country has more water stored than last year and above their usual levels
Food inflation refers to the rise in the prices of food items over a period of time. It occurs when the cost of essential food commodities like grains, vegetables, fruits, meat, and dairy products increases, leading to a higher overall cost of living, especially for lower-income groups who spend a significant portion of their income on food.
Causes of Food Inflation:
- Supply-Demand Imbalance: When demand for food outstrips supply, prices rise.
- Weather Conditions: Poor weather, such as droughts, floods, or unseasonal rains, can reduce agricultural production, leading to scarcity and higher prices.
- Input Costs: Rising costs of farming inputs like fertilizers, seeds, and fuel can push up the prices of food products.
- Global Market Trends: Changes in international food prices or disruptions in global supply chains can affect local food inflation.
- Government Policies: Tariffs, subsidies, or changes in taxation on food items may also lead to price fluctuations.
- Transport and Storage Issues: Poor infrastructure or inefficiencies in transportation and storage of food can result in higher costs and wastage, contributing to inflation.
1.Which of the following factors can contribute to food inflation in an economy?
- Increase in transportation and storage costs.
- Poor weather conditions affecting agricultural production.