Food inflation continues to be a major headache for the Reserve Bank of India even as core inflation (excluding food, fuel) is showing some signs of cooling. As can be seen from the chart below, growth in area under cultivation and yield over the last 10 years has been a gradual one, even as agriculture’s contribution to overall GDP has been on the decline. The RBI has repeatedly pointed out that ‘supply side’ problems (demand growing faster than supply) is the main reason for food inflation, and the government should address the issue at the earliest. Things may not improve overnight, but the government needs to sow the seeds for the next green revolution.
Chart: Index numbers of Area, Production and Yield of all Crops in India. Data for 2011-12 not available. Source: RBI