Considerable differences persist across states in terms of retail inflation, mostly on account of rural food price rise
Mumbai: With consumer price inflation fast emerging as the focal point of monetary policymaking in India, perhaps it is time to delve into the not-so-insignificant differences in inflation across states.
To begin with, inflation, both retail and wholesale, has risen in recent months. This has raised concerns about the scope of further interest rate cuts in the near future.
All-India retail inflation is now at a 23-month high of 6.07% year on year, above the upper bound of the Reserve Bank of India’s (RBI’s) inflation target.
However there are five major states—Assam, Himachal Pradesh, Kerala, Tamil Nadu and Uttarakhand—with inflation below 5% in July 2016; that is, below the target set by RBI for March 2017.
On the other hand, inflation is now more than 6% in 11 of the 23 major states and Union territories (including Goa and Delhi).
Therefore, it might be useful to know what is causing the differences across states.
Data from the ministry of statistics and programme implementation (MOSPI) shows that the inter-state variation in inflation is mostly a rural phenomenon, with much of it being driven by differences in rural food inflation.
The current series of consumer price inflation, with year 2012 as the base, consistently shows the inter-state variation, or standard deviation in rural inflation, to be higher than in urban inflation.
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