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Rise in inflation can not always be correlated with deficient rains as major foodgrain producing states of India are not entirely dependent on monsoon and have proper irrigation facilities in place, says a study by industry body PHD Chamber.
Monsoon behaviour is not much related to higher prices of food items and inflation is expected to remain subdued this year despite good or bad monsoon, PHD Chamber said in the study.
"The analysis shows that monsoon behavior is not much correlated with rising or declining food inflation. The poor correlation between the two highlights that even in years of good monsoon, inflation can rise and vice versa.
"On the other hand, the major food-grains producing states are not much dependent on monsoon behaviour as they have proper irrigation facilities," PHD Chamber said.
The analysis shows that there is a high degree of link between per capita income and rise in prices with around 40 per cent of food inflation explained by income growth levels of people.
According to the industry body, the time series analysis of last 25 years (1990-2015) explains that among the various demand and supply side factors, it is the increasing income that explains the food inflation in India.
Rising per capita income during the last many years and diversification of diet towards high-value food products like milk, eggs, meat, fish, pulses, vegetables and fruits is one of the reasons for rising inflation.
"Going ahead, the trend of build up in WPI and CPI Food Index suggests that inflation will remain subdued in the coming times.
"This can be attributed to the rural demand scenario been registered at low level in the recent times and substantial decline in international crude oil prices with oil prices declining from around USD 110 per barrel to around USD 60 per barrel," PHD Chamber said.
The industry body stressed that government must address the problem of inefficient supply chain management in the agricultural sector and improve the cold storage and warehousing facilities.
Further, there is a need to upscale public sector investments in agriculture infrastructure to improve the supply chain and timely delivery of food products to general public to avoid any sudden escalation in the prices of food items, it said.
