Managing Food Inflation in India : Does Monetary Policy Matters?

In the past two decades, there are many instances where the persistent increase in prices of onion, potatoes and other essential food items has led to fall of the government in the elections; and the party assuring bringing down of prices in 100 days had formed the new governments. It is generally agreed that a moderate inflation is acceptable. Generally, monetary and fiscal economists opine that an acceptable moderate rate of inflation is desirable as it prevents stagnation, provide optimistic outlook, help mobilize resources, boost investment and production. In this regard Tarapore Committee (1997) opined that 3 % inflation in India is ·acceptable, while Chakravarty. S Committee (1985) finds that an increase in price of not more than 4 percent is acceptable, whereas Rangarajan. C (2012) regards 2 to 3 % of inflation as acceptable, and 5 % inflation as threshold inflation for India. Hence the acceptable range of inflation in India lies between 3 to 5 percent. The continuous increase in prices or inflation causes the heart burn to majority of Indians as the Indian employment structure is tilted towards informal unorganized sector