How rural inflation is playing out -Keerthi Sanagasetti
-The Hindu Business Line
Low food inflation and high services inflation in rural India is doing more bad than good for the rural population
CPI Inflation in August came in at benign 3.21 per cent, although it recorded a marginal uptick from July. A deeper look at the numbers brings out the widening disparity between the urban and rural inflation.
Rural inflation in August was almost half of urban retail inflation. With the headline CPI inflation being well below RBI’s targeted 4 per cent and rural inflation too trending lower than urban, further rate cuts to boost demand and growth may be needed.
Rural retail inflation in August was at 2.18 per cent — almost half of the 4.49 per cent in urban areas. A part of the gap can be attributed to the difference in weights of the items considered in the respective consumer expenditure baskets. For instance, prices of housing are not considered while computing retail inflation for rural labourers.
The gap between urban and rural inflation has been widening in the last year, implying that not all can be attributed to the difference in weights alone.
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