2 Fall in food inflation is being driven by items which matter in the agri-production basket

The sharp moderation in food prices, to be sure, is not a secular trend. While prices of vegetables have fallen sharply, and cereal prices remain flat, prices of other food items such as pulses, edible oils and meat products continue to rise in double digits. This means that the economic pain of worsening terms of trade vis-a-vis the food sector is confined to those who produce cereals and vegetables. An analysis of crop-wise share in the value of output in agriculture shows that cereals and vegetables are the most important component: they account for more than half of India’s agricultural production basket. This means that the numbers of farmers who would gain from a rise in prices of pulses and edible oil would be much smaller than those who are suffering because of the weakness in vegetable and cereal prices.