DR Ambedkar IAS Academy

What is food inflation, its causes and impacts?

Food inflation refers to the condition where by there exist increase in wholesale price index of essential food item (defined as food basket) relative to the general inflation or the consumer price index.

Food inflation refers to rise in whole sale price index of essential food item. It means , when food price increased and consumption capacity decrease.

Supply side and external factors affecting food inflation: Fuel and agricultural wage inflation and international food price surge. On the supply side, rise in prices of key inputs, including fuel and agricultural wages have impacted the prices of various commodities and aggregate food inflation.

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Find out the real causes of rising food prices in the Saudi market require a doubling of systematic efforts dating back to the roots of the problem and analyze the economic dimensions professionally away from the interpretation and conjecture and belief, has received many economic readings of the phenomenon of rising prices and inflation in an effort to address and deal with economic merits lift harm the consumer does not affect the the economic process in the future.

Inflation its disastrous consequences on the national economies and when it was expanding globally, it means a kind of depression, but the immunity of states differ in their confrontation and resistance, which is a relative factor moves according to internal monetary policies rises and falls index according to the ability of processors on the discount, and those treatments begin and end with a fundamental question is .. Why are food prices rising? Through this report, we learn the answer in the Saudi reality:

Food prices are the main source of inflation in Saudi Arabia, where he rose high pace in recent years and the longer effects everyone. The main reason behind the rise in food prices is bolted prices on world commodity exchanges, in addition to some temporary factors, such as weather conditions that contributed to the complexity of the mutation process in the patterns of consumption and uses of agricultural products, causing so in food prices around the world. The current gap between supply and demand to shrink over time, and that agricultural commodities prices are falling at the end of it, but the evidence of conditions at the moment suggests that the next few years will see a continued rise in inflation in the prices of food items to about 5 percent on average.

Despite the rise in agricultural commodities in Saudi Arabia and emulation inflation levels of other Gulf states and not disagreeing too much about Britain or the United States, but we have not seen evidence of the involvement of retailers to raise prices deliberately, even though the claims of higher prices are not justified during Ramadan seem more credible. Other local factors in food prices, however, have contributed to global factors listed below were the main reason behind the expensive prices of food and beverages.

Mutated consumption patterns: a result of rising incomes in China and India, large mutations in dietary patterns globally, where eating habits are changing higher income level. Given the incredible number of population of 2.5 billion people in these two countries, the two mutations have huge implications for food prices worldwide. For example, we find that high consumption of rice in India directly from the expensive prices in the UK.

The use of agricultural crops for energy production: the use of agricultural crops as feedstock in the production of ethanol (from corn, wheat and sugar cane) came on the other agricultural crops areas account (especially in the United States) that fell, causing the high prices sharply.

Agricultural conditions bad: saw the last two years conditions of life bad unusually in a number of major agricultural countries, has Australia witnessed in particular the worst drought in over a century in 2006, was not agricultural conditions in Europe and North America the best off in the past Last.

The high cost of imported goods: where a rise in oil prices to increase the transportation and shipping cost also caused the devaluation of the riyal in the high prices of imported goods.

Although the effects of some of these factors will diminish over time (due to improved weather conditions, for example), but the situation on the ground prepared for higher inflation in food prices at a higher rate than usual, and not able to goods from global developments beyond their control.

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