What Is Driving Rural Inflation at a Higher Rate?

Tulsi Lingareddy of EPW Research Foundation analyses rural inflation in India:

The detailed exploration of trends in inflation along with the changing consumption patterns in rural and urban areas have suggested that while inflation in both the areas has moderated considerably during the past two years or so, the decline in rural areas has been slower than in urban areas particularly for fuel and light, clothing and footwear and miscellaneous groups.

Significant differences in the weighting diagrams of the two (rural and urban) consumption baskets accompanied by their divergent price movements have resulted in to a relatively higher inflation in rural areas in case of fuel and light group and transport and communication subgroup (in the miscellaneous group).

The higher rural inflation in clothing and footwear, household goods and services, recreation and amusement and health subgroups (in miscellaneous group) could be on account of two main reasons. First, prevailing rural infrastructure bottlenecks are apparently adding to marketing costs and trade margins (supply chain inefficiencies) while meeting the rising rural demand for these items. Second, the low pricing benefits emerging from e-commerce retailing has not percolated to rural areas due to inadequate logistics support.




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