The curious case of rising health, education inflation in rural areas

In rural areas, the inflation rate in health rose to 10.14% in December from in 4.7% January

Over the past few months, there has been a rather unusual trend in India’s inflation statistics.

While the headline retail inflation rate has fallen from 5.07 per cent in January 2018 to 2.19 per cent in December 2018, the inflation rate in both health and education sectors has been on the rise, particularly in rural areas.

Within the consumer price index (CPI), the heath index has risen from 4.9 per cent in January 2018 to 9 per cent in December 2018, while over the same period, the education index has risen from 4.2 per cent to 8.3 per cent.

In rural areas, the inflation rate in health rose to 10.14 per cent in December from 4.7 per cent in January. Similarly, the rate of price rise in education went up to 9.92 per cent from 5.2 per cent in this period.

This is a rather perplexing trend.

In fact, in a research note, Soumya Kanti Ghosh, group chief economic advisor, State Bank of India, noted that “the most puzzling aspect of the inflation data is the increase in rural health and education inflation at the time when rural demand is collapsing”.

So what explains this?

The health index in CPI is created using price data on hospital and nursing home charges, medicine (non-institutional), family planning devices, spectacles, doctors/surgeons’ fee — first consultation — (non-institutional), X-ray; ECG; pathological test (non-institutional), as well as other medical expenses (non-institutional).

Of these indicators, medicine (non-institutional) — which alone accounts for 68 per cent of the health index — has risen from 4.5 per cent in January 2018 to 10 per cent in December. This suggests that much of the recent upward trend observed in health inflation is on account of the rise in this indicator.

Now, medicine (non-institutional), in turn, is based on prices of pain-killer tablets, cough syrup, vitamin b complex, anti-fever and antibiotics, among others.

But prices of these items have not risen in line with what is observed from the index, say experts that Business Standard spoke to. 

A similar conundrum exists in education.

The education index in CPI comprises books and journals, stationery; photocopying charges, tuition and other fees (school and college), private tutor/coaching centre and others.

Of these, school and college tuition and other fees — which accounts for almost two-thirds of the education index — has risen from 4.9 per cent in January 2018 to 8.1 per cent in December, implying that much of the rise in the education index can be traced to this. 

But school and college fees don’t change that rapidly, say experts. Neither does private tutors/coaching centres’ fees which has risen from 1.8 per cent in January 2018 to 12.8 per cent in December 2018.

This makes it difficult to decipher changes in the health and education index.

One change that has taken place is that of the agency that collects data in rural areas.

Earlier, the National Sample Survey Office (NSSO) used to collect price data in urban areas, while for rural areas, information on prices was collected by the Department of Posts.

However, after the recommendation of the technical advisory committee on prices, the NSSO was charged with collecting information on prices in rural areas.