RURAL INFLATION

21st May, 2022 Economy

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Context

Surging inflation is forcing many poor rural Indians to rein in spending, threatening a slowdown for many companies.
The Ukraine crisis and global supply chain disruptions have stoked prices worldwide, but people in developing countries such as India are more vulnerable to even small cost increases that can wreck their meagre budgets.

Inflation Trend

Official data pegs rural inflation in March at 7.66%, with several States reporting even higher inflation, including West Bengal (8.85%), Uttar Pradesh and Assam (8.19%) as well as Madhya Pradesh (7.89%).
Consumer food price has increased by 100 per cent between March 2021 and March 2022, according to the All India Consumer Price Index (CPI) released by the National Statistical Office April 12, 2022.
The consumer food price inflation for rural areas was 3.94 per cent in March 2021. It went up to 8.04 per cent in March 2022. Similarly, the CPI for rural India has also gone up to 7.66 per cent in 2022, from 4.61 per cent in March 2021.
West Bengal has seen double-digit rural inflation over the last two months, while rural inflation in Assam has also topped the national level over the last three months even as urban inflation remains below the national level.
Madhya Pradesh, Telangana, Haryana, Gujarat, Maharashtra and Jammu & Kashmir too have recorded a higher rural than urban inflation in the last three months at least.

Key Drivers of inflation

Price rise in oils and fats, vegetables and meat and fish have largely driven the hike.
Year-on-year comparison shows that oils and fats prices spiked 18.79 per cent (March 2021 to March 2022). This is the highest price rise among the food basket items used to measure the consumer food price inflation.
Vegetables reported an increase of 11.64 per cent and meat and fish 9.63 per cent. Besides, fuel and light segment rose 7.52 per cent; clothing and footwear 9.40 per cent; housing 3.38 per cent; and the pan, tobacco and intoxicants climbed 2.98 per cent.
Food price rise has been fuelling overall inflation in India in recent months.
The spike was far more pronounced in rural India where food inflation hit 8.04%.
Possible reasons include the cushion of subsidies routed through the public distribution system across income levels in some of the southern states. Also, states with lower urbanization rates end up spending more on food and fuel, while those with more urban areas end up spending a higher share on services.
Among fuel, there is a steady increase in the weighted contribution of kerosene and firewood in headline inflation, reflecting the possible high fuel costs in rural areas and industrial usage.
Kerosene has seen a sharp spike, almost 35-40 per cent month-on-month increase.

Controlling Inflation: https://www.iasgyan.in/daily-current-affairs/controlling-inflation

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