Inflation is high, not just food

Abstract

What are considered to be cost-push factors, such as minimum support price, are mostly the delayed response to demand overheating Examining various agricultural prices, one of us (Manur) had concluded that hikes in the minimum support price (MSP) are not the root cause of Indias ongoing high inflation (Procurement price inflation bogey, FE, March 28, http://goo.gl/49TD9). This view has been severely criticised by Ghosh and Arora (Dont blame MSP alone, FE, April 2, http://goo.gl/0P4xs). This article is a rejoinder to their criticisms.

Basically, the article sought to assess whether Indias inflation is demand-driven or cost-driven - more specifically, by the policy intervention of MSP, generally considered to be a cost-push factor. The approach taken was as follows. Divide the commodities into two groups: those with MSP (group A) and those without MSP (group B), the control group. If MSP is the critical and causal factor underlying food inflation, then the inflation rate should be, on average, higher for group A than group B. However, if this is not the case, then inflation should then be attributed to demand pressures, and not to MSP. Read more at: https://www.financialexpress.com/archive/inflation-is-high-not-just-food/1115301/