Supply-chain efficiency

Improvements can reduce food price spikes

Episodes of food-price volatility are not unusual in India. Given that higher food prices are driving the headline inflation rate, it is important — for better preparedness — to understand the usual causes of a spike. Demand-supply imbalances and geopolitical tensions, along with the El Niño effect, are being seen as the key drivers of food inflation. At the same time, however, supply-chain inefficiencies may also be playing a role in keeping food inflation high. In this context, a recent research paper by economists at the Reserve Bank of India examined supply-chain dynamics and the role of markups charged by