How food inflation is squeezing Indian households

Food security is increasingly choking Indian households, forcing them to tighten their belts as the cost of essential items rises sharply.

Food inflation has hit double digits for the first time in six years. In October 2024, the prices surged by 10.9%, driving retail inflation to a 14-month high of 6.2%, up from 5.5% in September. The price rise, particularly for vegetables and edible oils, is putting unprecedented strain on family budgets, compounding economic pressures and exacerbating food insecurity across the country.

Earlier spikes were due to factors like unseasonal rains and supply chain issues. Now, rising global commodity prices are adding to the problem, with sharp increases in the cost of imported edible oils and pulses.

Food inflation contributed 73% to the headline rural inflation. In contrast, it only contributed 56% of the overall urban inflation.

The Centre For Policy Research believes this inflation is temporary. However, India’s agricultural sector faces a more persistent problem: limited diversification.

Most Indian farming focuses on staple crops like rice and wheat, while more nutritious and diverse crops are often overlooked. This lack of variety leads to an over-reliance on a few crops, making food security more vulnerable and causing price hikes when these crops are affected by climate change or global market shifts. Experts say food inflation in India requires deeper reforms to ensure long-term food security.

‍Rising food prices

The impact of food inflation is closely tied to the slow growth of wages in India. Between 2023 and 2024, wage growth has been sluggish, and for rural workers in low-income households, it has been negative for ten straight years, according to the Centre for Monitoring the Indian Economy (CMIE). The gap between stagnant wages and rising food prices is making the effects of inflation even harder for many people to bear, as their earnings aren’t keeping up with the cost of essential food items.

Rural households feel the impact of rising food prices more sharply because wages are lower, and a large part of their income goes towards food. In rural areas, food expenses make up over 50%-60% of the average household budget, compared to just 30%-40% in urban areas. A research note from CMIE’s economic outlook highlights this difference: “Food inflation contributed 73% to the headline rural inflation. In contrast, it only contributed 56% of the overall urban inflation. This stark disparity is because of the disproportionately higher weight of food held in the rural consumption basket.”

Food inflation worsens rural distress and hunger, deepening the gap between rural and urban communities. Without clear policies to raise rural incomes, control food prices, and improve farming, rural families will keep facing financial challenges.

Role of e-commerce

Today, more urban shoppers are turning to e-commerce for their daily needs, attracted by quick and easy deliveries. But this convenience comes with hidden costs. Delivery fees, service charges and price markups can make online grocery shopping more expensive. These extra costs can be avoided by shopping at local stores and markets instead.

The impact of e-commerce on food prices is more complex when we consider its effect on workers and households. Gig workers for delivery platforms often earn low wages, work long hours and lack job security. While e-commerce has created jobs, many delivery drivers struggle to make enough money as rising fuel and maintenance costs cut into their earnings, leaving them financially vulnerable, especially during times of food inflation.

For many urban working women, e-commerce platforms save valuable time. Outsourcing tasks like grocery shopping and meal prep helps women juggling careers, household chores and childcare. But this convenience also drives up food prices due to higher delivery and service charges, which reduces buying power, especially for households already struggling with rising costs.

‍Long-term solutions

India has tried to tackle food inflation with subsidies, food provision schemes and adjustments to minimum support prices for key crops. However, these short-term fixes don’t address the deeper causes of food inflation.

A large portion of the country’s produce is wasted due to poor storage facilities and limited distribution networks. To make agriculture more sustainable, we need to focus on major changes in the sector. Improving soil health, providing accessible technology and encouraging diverse crop rotation can boost agricultural productivity. Combined with stronger supply chains, these steps can help ease pressure on food prices.

At the same time, supporting low-income households should be a top priority. Measures like direct cash transfers and a more efficient Public Distribution System (PDS) can provide immediate relief to those most affected. By adopting these long-term and comprehensive strategies, India can reduce the impact of food inflation and build a fairer, more stable food system for the future.

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