Inflationary pressures on India’s domestic food prices: unravelling the impact of global macroeconomic factors

Purpose The purpose of this paper is to investigate how the rising domestic food price inflation in India is influenced by global macroeconomic factors like crude oil, exchange rate, foreign aid, global food prices and trade openness from January 1993 to December 2022. Design/methodology/approach The study has employed the structural break, autoregressive distributed lag cointegration tests to assess the stationarity and long-term relationship between the variables and the Toda–Yamamoto Granger causality test to demonstrate the causal relationship between the variables. Findings The study highlights the long-term relationships among variables, shedding light on the influence of global macroeconomic factors on domestic food price inflation in India. It reveals that food price inflation in India is positively influenced by crude oil prices and global food prices while being negatively affected by currency rates, foreign direct investment and trade openness. Originality/value Based on the findings, the study suggests that initiatives to reduce demand for crude oil and imported food products could help mitigate domestic food price inflation in India. Addressing the depreciation of the exchange rate is crucial to combat significant inflation in domestic food prices, calling for specific government interventions. Furthermore, promoting trade liberalization and foreign direct investment in the agricultural sector could help alleviate domestic food price inflation, emphasizing the importance of reducing customary trade barriers to encourage investment and trade openness.