Analysis of Rising Wheat Prices: India Story

Abstract:     
Inflation, as measured by year-on-year variations in the whole sale price index (WPI), had declined sharply to 0.8 per cent by end-March 2009 from the peak of 12.9 per cent on August 2, 2008. In 2009-10, it further declined and turned negative in early-June 2009 and continues to remain negative since then (-1.2 per cent as on July 11, 2009). The observed negative WPI inflation reflects the high base effect on account of sharp increases in prices during the first half of 2008-09. The momentum of the WPI since end-March 2009, however, indicates the existence of price pressures. During 2009-10 (up to July 11,2009) WPI has registered an increase of 3.5 per cent. The upward revision in prices of administered petroleum products effective from July 2, 2009 on account of increases in international crude prices partly contributed to the increase in WPI during this period. Though international commodity prices had declined substantially from the peak recorded in 2008-09, they exhibited some firming up in the first quarter of 2009-10. The domestic supply prospects of key commodities are also affected by the delay in the progress of the monsoon. The visible signs of price pressures even as the headline inflation number turned negative over the short-run pose complex challenges. CPI based inflation in India remains high and the divergence between WPI inflation and CPI inflation continues to persist.

In view of the scenario stated above the present paper attempts to analyse the reason behind the price rise in the commodities, particularly in wheat.

Number of Pages in PDF File: 19

Keywords: price rise, food, commodities,wheat, bio-fuel, inflation, CPI, WPI, India

JEL Classification: E23, E31, H57

Accepted Paper Series