**Chapter 4

Demand-side Determinants of Food Infla7on in India**

4.1

Food prices in India are usually looked at in terms of things like the weather. How much it
costs to make food.. Over the last fiEeen years what people want to buy has become just as
important as how much food is available. The Indian economy has changed a lot. More
people are living in ci7es people have money to spend the government is helping people
more and people want to eat different types of food. All these changes have really affected
what people want to buy when it comes to food. Food demand, in India has changed a lot
because of these things. These changes have led to food prices and they have also kept food
prices high even when we have enough food from farms.

This part of the book looks at what makes food prices go up in India from 2010 to 2025. It
looks at how things like people moving to ci7es gePng paid more. The government helping
people buy food have made food prices go up. We want to know more about how people're
ea7ng healthier and how government programs are helping people buy the food they need.
This part of the book will try to figure out how much of the reason food prices keep going up
in India is because of the people buying food like the food infla7on, in India.

4.2 Popula7on Growth and Rising Aggregate Food Demand

The popula7on of India is s7ll a reason why people need more food. Even though fewer
babies are being born the total number of people in India has kept going up. India had about
1.23 billion people in 2010. This number went up to over 1.42 billion by the middle of the
2020s. This makes India the country with the people in the world. Because there are more
people, in India the country needs more food overall. Indias popula7on growth and Indias
food demand are closely related so Indias popula7on growth is a deal.
When people eat a liYle food it makes a big difference in how much food is needed in total.
This maYers a lot for foods like cereals, milk and vegetables that people buy no maYer how
much money they have. As the popula7on grows it means we always need food and that puts
pressure on the people who sell food. Popula7on growth is a deal because it keeps making
the demand, for food go up.

Table 4.1 shows us the popula7on trends and the food infla7on indicators for years. We can
see the popula7on trends in Table 4.1 and also the food infla7on indicators, for those years.
The food infla7on indicators are shown in Table 4.1 for the selected years.

Table 4.1: Popula7on Growth and Food Infla7on in India (2010–2025)

Year

Popula7on (million)

CPI Food Infla7on (%)

Remarks

2010

1,227

Baseline period
2013

1,276

14.7

Major food infla7on surge

2016

1,311

Moderate

Easing infla7on

2019

1,366

Moderate

Pre-COVID period

2020
1,380

Vola7le

COVID-19 disrup7on

2022

1,418

Elevated

Global commodity shock

2025

1,420+

–2.7

Food infla7on modera7on

Source: World Bank Popula7on Es7mates; MOSPI CPI Data.

The popula7on growth has also had an effect on how money people make and the fact that
more people are moving to ci7es. This has made the demand for food go up a lot and people
need food than just what they need to survive. The thing is, people do not really change how
food they buy even if the price goes up especially when it comes to the food they really need.
So when the popula7on growth makes the demand for food go up it also makes food prices
stay high. This leads to infla7on that lasts for a long 7me. The popula7on growth and the
demand, for food are really. The popula7on growth is a big part of why food prices do not go
down easily.

4.3 Urbanisa7on and Changing Consump7on Behaviour

India has seen a lot of changes in the way people live. More and more people are moving to
ci7es. This means that the way people live, work and eat is changing. People who live in ci7es
eat a lot of types of food. They like to have milk, fruits, vegetables and packaged foods. They
also like to eat out. This is different, from people who live in areas. Urbanisa7on is a part of
the changes happening in India. Urbanisa7on is changing the way people live in India.

The Household Consump7on Expenditure Survey, which is also known as the HCES for the
year 2023 to 2024 shows that there are differences in what people eat in the city and in the
country.

The Household Consump7on Expenditure Survey 2023 to 2024 found that people who live in
the country spend more of their money on food.

On the hand people who live in the city spend more of their money on things that are not
food.

This is because people, in the city have money and they like to buy different kinds of things
according to the Household Consump7on Expenditure Survey.

Table 4.2: Share of Food and Non-Food Expenditure in MPCE (2023–24)

Area
Food Share (%)

Non-Food Share (%)

Rural

47.04

52.96

Urban

39.68

60.32

Source: MOSPI, Household Consump7on Expenditure Survey (2023–24).

People who live in ci7es do not change what they buy to eat when prices go up or down
because they have money and it is more stable. This means that the people who live in ci7es
will s7ll buy food when it costs more. So when more people move to ci7es it makes the
demand for food go up and this causes food prices to stay high for food that goes bad quickly
and for expensive food, like urban food. Urban food prices are also higher because of this.

4.4 People are making money and they can buy more things now because their income is
going up. This means that the average person has purchasing power. Rising per capita
incomes is a deal because it affects what people can afford to buy. As per capita incomes rise
people have money to spend on things they want and need. This is important because rising,
per capita incomes and purchasing power can change the way people live.

People in India have money to spend on food because their incomes are going up. From 2010
to 2025 the economy did well wages. More people got jobs outside of farming. This meant
that people in both the country and the city had money to buy things. Programs that created
jobs and gave money to people who needed it also helped people with incomes have more
money to spend. Food demand, in India is going up because of these things and food demand
is really important when it comes to India.

People who earn money are now buying beYer and different kinds of food. This is what Engels
Law said would happen. Even though people are spending less of their income on food they
are buying milk and dairy products, fruits, vegetables, edible oils, eggs and meat. The Reserve
Bank of India and the Interna7onal Monetary Fund have done studies that show when people
have money they want to buy more food, especially things, like meat and eggs that have a lot
of protein. This is causing food prices to go up for these kinds of foods because there is not
enough supply to meet the demand. Food prices are going up. It is hard to find enough of
these foods because people want to buy so much of them.

People are earning money now. This means they can s7ll buy things when prices go up. So
companies do not have to lower their prices. The demand for things is s7ll high because
people have the money to spend. This is what is happening with rising incomes and the
demand, for things. Rising incomes are a part of the reason we have demand-pull infla7on.

4.5 Changing Dietary PaYerns and Nutri7on Transi7on

The big change in what people want to eat in India is really important. People in India are
ea7ng food made from grains and more food with lots of different things in it and food that
has a lot of protein. The nutri7on transi7on in India is happening because people have money
now they live in ci7es they know more about being healthy and they like different food. The
nutri7on transi7on in India is a deal and it is changing what people, in India eat every day.
Data from the Na7onal Sample Survey Office and the Food and Agriculture Organiza7on show
that people are spending less of their money on cereals and more on milk, fruits, vegetables,
edible oils and food that comes from animals. India is now one of the users of milk in the
world. The demand for fruits and vegetables in India is also going up fast. People, in India
want to buy milk and more fruits and vegetables.

Table 4.3: Composi7on of Household Food Expenditure (% Share)

Food Group

Share (%)

Cereals

Declining

Milk & Dairy

Increasing

Fruits & Vegetables

Increasing

Eggs, Meat & Fish

Increasing
Edible Oils

Increasing

Source: NSSO, FAO Food Balance Sheets.

The thing, with these food items that people really want is that they are not always available.
This is because they go bad quickly they are expensive to make. We do not have good enough
places to store them. So when people want more of these food items it usually means that
the prices go up of there being more of them. This makes food cost more and more. The food
items that people really want are s7ll hard to get. This is why food costs are going up.

4.6 Government Welfare Schemes and Food Demand

The government of India has some schemes that help people get food. One of these schemes
is the Public Distribu7on System. This system gives people food grains at a price. The Na7onal
Food Security Act made this system stronger. It helps a lot of people in India get the food they
need.

When the COVID-19 pandemic happened the government started the Pradhan Mantri Garib
Kalyan Anna Yojana. This scheme gave free food grains to the people who needed them. The
Pradhan Mantri Garib Kalyan Anna Yojana helped a lot of people get food during this 7me.
The government welfare schemes like the Public Distribu7on System and the Pradhan Mantri
Garib Kalyan Anna Yojana have really helped shape what people, in India eat.

Table 4.4: Major Food-related Welfare Schemes in India

Scheme
Nature of Support

Coverage

PDS

Subsidised cereals

Large share of popula7on

NFSA

Legal food en7tlement

Priority households

PMGKAY

Free food grains

COVID-19 period

Source: Economic Survey; Ministry of Consumer Affairs.

These plans helped people buy the things they need by making sure everyone has enough to
get by especially the people who are struggling. When the government bought a lot of food to
give to people who need it that also made more food available in the market especially grains
like cereals. So food security got beYer because of these plans. They also meant that people
kept buying food at a steady rate, which made it hard for food prices to go down even when
there was a lot of food available like during supply shocks, with food supplies. These food
security plans and these supply shocks with food supplies are important to consider when we
talk about food supplies and food security plans.

4.7 Demand-side Pressures and Infla7on Persistence

Food infla7on in India is a problem that does not go away. The main reason for this is that
people want to buy a lot of food. Even when there is food available the prices stay high. This
is because the popula7on of India is growing and more people are moving to ci7es. As people
get money they want to eat different kinds of food. The government also helps people by
giving them money, which means they can buy food. All these things together make people
want to buy a lot of food. This does not change easily. Food infla7on, in India is an issue
because of these demand-side factors and food prices oEen stay high.

Food demand does not really change when the price goes up for people who live in ci7es and
have a medium income. So when the price of food increases people do not stop buying much
food as they used to. When a lot of people want to buy food and there is not food available
even small problems can cause prices to keep going up for a long 7me. This is why food prices
keep going up in India over again during the 7me we were studying food prices in India. The
food demand and the fact that there is not food available explain why this keeps happening
with food prices, in India.

4.8

This chapter looked at the things that affect food infla7on in India from 2010 to 2025. Food
infla7on in India is influenced by factors. The main ones are people having children more
people moving to ci7es people earning more money people ea7ng different kinds of food and
government programs that help people. All these things together have made people want
food over 7me. These are not like problems with gePng food to people, which can be fixed
quickly. Food infla7on, in India is affected by these demand-side factors that are changing the
economy in big ways for a long 7me.

The evidence suggests that demand-side pressures have played a significant role in the
persistence of food infla7on, par7cularly in high-value and protein-rich food items. Ignoring
these dynamics would provide an incomplete understanding of food infla7on in India. The
next chapter examines supply-side determinants in detail to enable a compara7ve assessment
of the rela7ve importance of demand and supply factors in driving food infla7on.