Determinants of Food Inflation in India

This paper aims to elucidate the different determinants of food inflation in India over 1997 to 2017. The paper uses a Vector Error Correction Model (VECM), and a Vector Auto Regression Model (VAR).The paper considers both supply and demand-side determinants on an annualised scale. The VECM model finds a long-run relationship between Food Inflation in India, Area under Acreage, Minimum Support Prices (MSP), and the trend in Urban Population. The VAR model finds a relationship between Food Inflation, and the FAO’s Food Price Index; Food Inflation, and Total Cost of Cultivation; and Food Inflation and the Long Period Average at I (1).