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Directions (81-88) : Read the following passage carefully and answer the questions given below it. Certain words/phrases are printed in bold to help you to locate them while answering some of the questions.
Food inflation is a significant negative feature of today's economic environment and more so, in respect of our country. It has a tremendous impact on quality of life, as people struggle to maintain nutritional standards that they had previously achieved, or give up some other forms of consumption so as to keep themselves well-fed. For a country that legitimately believed that it had effectively dealt with its vulnerability to food shortages in the form of the Green Revolution of the late 1960s and early 1970s, the current situation comes as a rude reminder that solutions are rarely permanent.
To place the current developmentsin context, it must be pointedout that the world economy isitself facing problems with foodprices. Food as a category has beenfollowing global trends in commodityprices over the past couple ofyears. There is a view that this isthe outcome of the larger trend towardsfinancialisation of commoditieswherein large increases in globalliquidity as a response to the2008 crisis feed directly into higherasset prices, including commodities.Be that as it may, the price dynamicsof individual food items suggestthat there are also some commodi- ty-specific factors at work, whichmay either reinforce or counteractthe broader trend. Sugar, for example,shows fluctuations in responseto current supply conditions, whilewheat reflects the effect of persistentdrought in some major cultivatingareas.
India's food inflation is certainlylinked to global trends, particularlyin relatively heavily traded commoditieslike sugar and oilseeds, but,given the high degree of self-reliancein many other commodities, domesticfactors play a big role, althoughthe drivers of inflation in recentmonths have been energy prices anddemand pressures, as reflected inthe non-food manufactured productsindex, food prices contributedsignificantly in the first half of 2010and remain uncomfortably high.Apart from the direct impact on theindex, it is also likely to feedthrough into the wider inflationaryprocess through higher wage demands,of which there is some evidence.
It is generally believed that foodprices are highly sensitive to monsoonperformance, but this beliefhas been tested over the past fewyears. There is sufficient evidence tosuggest that food prices are beingdriven not by transitory factors, suchas rainfall, but by more fundamentalforces. Essentially, a long periodof relatively rapid growth hastaken large numbers of householdsacross a threshold at which theybegin to look for nutritional diversification.The predominance of cerealsin the typical household dietgives way to greater balance and aconsequent increase in the demandfor proteins - pulses, milk, meat,fish and eggs, vegetables and fruit.It is no surprise that these itemshave been the primary causes of foodinflation in the recent period.
Food inflation is a significant negative feature of today's economic environment and more so, in respect of our country. It has a tremendous impact on quality of life, as people struggle to maintain nutritional standards that they had previously achieved, or give up some other forms of consumption so as to keep themselves well-fed. For a country that legitimately believed that it had effectively dealt with its vulnerability to food shortages in the form of the Green Revolution of the late 1960s and early 1970s, the current situation comes as a rude reminder that solutions are rarely permanent.
To place the current developmentsin context, it must be pointedout that the world economy isitself facing problems with foodprices. Food as a category has beenfollowing global trends in commodityprices over the past couple ofyears. There is a view that this isthe outcome of the larger trend towardsfinancialisation of commoditieswherein large increases in globalliquidity as a response to the2008 crisis feed directly into higherasset prices, including commodities.Be that as it may, the price dynamicsof individual food items suggestthat there are also some commodi- ty-specific factors at work, whichmay either reinforce or counteractthe broader trend. Sugar, for example,shows fluctuations in responseto current supply conditions, whilewheat reflects the effect of persistentdrought in some major cultivatingareas.
India's food inflation is certainlylinked to global trends, particularlyin relatively heavily traded commoditieslike sugar and oilseeds, but,given the high degree of self-reliancein many other commodities, domesticfactors play a big role, althoughthe drivers of inflation in recentmonths have been energy prices anddemand pressures, as reflected inthe non-food manufactured productsindex, food prices contributedsignificantly in the first half of 2010and remain uncomfortably high.Apart from the direct impact on theindex, it is also likely to feedthrough into the wider inflationaryprocess through higher wage demands,of which there is some evidence.
It is generally believed that foodprices are highly sensitive to monsoonperformance, but this beliefhas been tested over the past fewyears. There is sufficient evidence tosuggest that food prices are beingdriven not by transitory factors, suchas rainfall, but by more fundamentalforces. Essentially, a long periodof relatively rapid growth hastaken large numbers of householdsacross a threshold at which theybegin to look for nutritional diversification.The predominance of cerealsin the typical household dietgives way to greater balance and aconsequent increase in the demandfor proteins - pulses, milk, meat,fish and eggs, vegetables and fruit.It is no surprise that these itemshave been the primary causes of foodinflation in the recent period.
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