India’s Economic Problem: Growth and Inflation

• Cabinet Minister suggests the Reserve Bank of India should focus on growth instead of food price inflation.

• National income data shows a significant decline in average annual growth since 2016-17, with a substantial increase in food price inflation.

• Critics argue the government’s focus on growth is silent on inflation, with food-price inflation breaching the 10% mark.

• Food inflation is a structural problem reflecting the type of growth India is experiencing, where agricultural production is not expanding at the rate of rising demand.

• High inflation, especially food products, negatively affects the well-being of those whose income does not match inflation.

• The rise in food price inflation from 2019-20 has negatively correlated with manufacturing growth.

• The problem is not lack of growth, but inequitable distribution across the population, partly induced by food price inflation.