Working Paper
The Political Economy of Food Price Policy

the Case Study of India

India did not experience any food price spikes during 2007–08 when global food prices erupted. It was partly due to India’s ban on exports of wheat and common rice. But the fiscal stimulus that the government provided in 2009 in the wake of G8 countries’ call to avert economic recession, coupled with one of the worst droughts India experienced in that year, led to rising food prices in India since mid-2009. Food price inflation has hovered between 8–12 per cent per annum since then. The nature of food inflation, however, changed from being cereals-led to high value products (fruits and vegetables, and protein foods) during 2010–11 and 2011–12. While food inflation invited severe political protests, the situation did not escalate to any riots or violence. The government has been trying hard to cool down food prices by reining-in fiscal deficit, tightening monetary policy, releasing more grains from public stocks, and distributing subsidized grains through the public distribution system to targeted population. Yet it has not quite succeeded in containing an uncomfortably high level of food inflation. This is a cause for concern given that India continues to face food security challenges given the large number of people living below the poverty line and a significant part of them being susceptible to food price shocks.