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Tracking 'sticky' food prices important for MPC, says RBI paper

The compiled dataset comprises 1.3 million price data points covering 45 food items on a weekly basis across 85 centres in the country for the period 2005-18.

Topics
food prices | Reserve Bank of India

Abhijit Lele  |  Mumbai 

inflation, food, vegetables, money, cash, expense, expenditure, prices, income, savings
The paper looked at the price setting behaviour in the food sector in India using a novel micro-level dataset.

in India are showing varying degrees of price stickiness, according to a (RBI) study, which suggested that paying attention to the sticky component of food inflation — besides core inflation — is important for the conduct of monetary policy.

The paper looked at the price setting behaviour in the food sector in India using a novel micro-level dataset.

The stickiness in has relevance for policy in India as food accounts for about 46 per cent in overall consumer price index (CPI), the highest among inflation-targeting countries.

Therefore, the risk of policy errors from excluding sticky components in the food sector is larger in India as against advanced economies, where food has a low share in CPI (<10 per cent), the RBI study said.

The compiled dataset comprises 1.3 million price data points covering 45 food items on a weekly basis across 85 centres in the country for the period 2005-18.

This was one of the first attempts at compiling actual price data for estimating price stickiness in India. These products represent more than two-thirds of the items in the official CPI of food category representing each of the 10 product sub-groups, it added.

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First Published: Wed, September 23 2020. 23:48 IST
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