Rural Areas Reported Higher Retail Inflation Than Urban Areas in December: Data

Government data showed that 23 states and Union Territories recorded higher rural inflation in December.

New Delhi: Rural areas reported higher retail inflation than urban areas in December, the Hindu BusinessLine reported, citing data based on the Consumer Price Index.

According to the report, retail inflation was the the highest in two north-eastern states: Mizoram and Tripura. While Mizoram clocked the highest rate of retail inflation at 13.94%, Tripura saw the maximum urban inflation at 10.43%, it said.

Government data showed that 23 states and Union Territories recorded higher rural inflation in December. Among the large states, including Telangana, Madhya Pradesh, Uttar Pradesh, Haryana and Punjab, which majorly depend on the farm sector, reported high rural inflation, the report said.

Consumer price index (CPI)-based inflation measures the movement in prices of food and beverage, clothing and footwear, housing, fuel and light, pan, tobacco and toxicants, and miscellaneous. These commodities have different weightage in the rural and urban inflation baskets.

The food and beverage category includes cereals, meat and fish, eggs, milk products, fruits, vegetables, and spices, among others.

The primary reason rural retail inflation is higher is the larger share of food and beverage components in the rural CPI basket. Manisha Malhotra, associate professor, department of Economics at Banaras Hindu University told the newspaper that in rural CPI, F&B components account for 54.18%, but urban inflation only accounts for 36.29%.

Also read: High Inflation Likely Pushed Household Financial Savings to 30-Year Low in H1 of FY23: Report

Rural inflation, however, is a cause of concern as more than 64% of India’s population lives in rural areas. It is this segment that is the worst affected due to high food inflation.

Anil Kumar Sood, professor and co-founder, Institute of Advanced Studies in Complex Choices, told the business daily: “We expect that the elevated rural inflation is likely to hurt the rural economy, as the pricing power is not with the rural households.”

Since January 2022, rural retail inflation has remained higher than urban inflation in the country. Mahesh Vyas, head of the Centre for Monitoring Indian Economy, had told Quartz that uneven rainfall affected sowing activities, which caused an even more increase in rural joblessness.

Added to that, an increase in the prices of essential items such as milk and biscuits, clothing, footwear, and personal care products affects the rural purchasing power.