- With CPI inflation for cereals touching 8.69% and 17.14% for pulses, government intervention in such a scenario has prevented runaway inflation.
- This has reignited the debate over need for a food buffer policy in India to ensure price control.
Need for a food buffer policy –
- Control Inflation: Open market sales of buffer stocks for wheat and chana have helped control inflation in cereals and pulses.
- Climate Impact: Increasing climate-driven supply shocks and price volatility necessitate extending buffer stocks to other staples.
Example of Government Intervention
- FCI offloaded 34.82 lakh tonnes (lt) of wheat in 2022-23, rising to 100.88 (lt) in 2023-24. This reduced wheat inflation from 25.37% in February 2023 to 6.53% in May 2024.
- NAFED bought large quantities of Chana during surplus years, preventing higher inflation. Current season saw limited procurement due to high open market prices but existing stocks helped control prices.
Measures –
- Expanded Procurement: Include more pulses, oilseeds, staple vegetables, and skimmed milk powder (SMP).
- Storage and Sales: Store vegetables in processed forms for institutional sales; SMP can stabilize milk prices during shortages.
- Fiscal Cost: Buffer stocks to be offloaded at near-market prices during scarcity, minimizing fiscal impact.
Thus, buffer stocking can curb excessive food price volatility, benefiting both consumers and producers. Similar to RBI’s forex reserves, a food buffer policy is crucial for managing climate-driven price instability.
Dig Deeper: Read about CPI and WPI inflation differences and various official agencies which bring out this numbers.
