Rural Gujarat tops retail inflation league table

Villages in Gujarat bore the brunt of double-digit consumer price index (CPI)-based inflation in July.

Rural Gujarat saw the highest inflation among 22 states for which data was released on Friday. The CPI-based inflation in rural Gujarat was at 10.14 per cent in July, compared with 8.91 per cent in the previous month.

Odisha was another state where double-digit inflation was recorded in rural areas. The rate of price rise climbed to 10.02 per cent in these areas in July, compared with 9.94 per cent in June.

In July, while inflation in rural Odisha rose by 0.08 percentage points compared to the previous month, it went up by 0.23 percentage points in rural Gujarat.

Other states where rural areas saw higher inflation in July than the national average of 6.66 per cent were Maharashtra (8.39 per cent), Andhra Pradesh (8.06 per cent), Telangana (7.96 per cent), Rajasthan (7.56 per cent), West Bengal (7.24 per cent) and Jharkhand (6.88) per cent.

Difference between inflation in rural and urban parts of Gujarat and Odisha was also quite higher than the national average. In Gujarat, the difference was 1.96 percentage points, as inflation in urban areas was at 8.18 per cent. Similarly, the difference stood at 1.39 percentage points in Odisha, as the rate of price rise was 8.63 per cent in urban areas.

At the national level, the gap between rural and urban areas stood at 1.27 percentage points in July, with urban inflation at 5.39 per cent and rural inflation at 6.66 per cent.

These two states also had the highest inflation in urban areas as well. However, urban inflation in Odisha was higher than Gujarat.

CARE Ratings Chief Economist Madan Sabnavis said these are drier parts of India and, hence, they are witnessing a spurt in inflation. Food items have more than 45 per cent weight in CPI. Once kharif crops come in markets, inflation would moderate, he predicted.

Area sown under kharif crops rose to 95.42 million hectares as on August 12 this year, against 89.51 million hectares in the corresponding period last year.

Particularly, area under pulses rose to 13.02 million hectares against 9.77 million hectares in this period. Inflation in pulses rose to 27.53 per cent in July, from 26.86 per cent in the previous month. Kharif crops arrive in markets from October onwards.

In general, the gap in inflation also widened between urban and rural areas in July, compared with the previous month. It rose to 1.27 percentage points in July, from 1.03 percentage points (rural — 6.29 per cent, urban — 5.23 per cent) in the previous month.

Interestingly, food inflation was higher in urban parts than in rural areas in both these months. It was 8.25 per cent and 8.80 per cent in July and 7.69 per cent and 8.16 per cent in June in urban and rural areas, respectively.

Overall inflation rose to 6.07 per cent in July, the highest since the new CPI series was launched in December 2014. If inflation continues to remain over 6 per cent from August onwards for three consecutive quarters, Reserve Bank of India will have some explaining to do under the new mechanism of inflation targeting. The next repo rate would be fixed by the proposed monetary policy committee.