Prices in India are rising faster than many large economies, EM peers

Dozen states have reported higher inflation numbers than the all-India figure of 7.44 per cent

The inflation rate in India is rising faster than many large economies, as well as key emerging market peers.

The average Indian consumer’s cost of living rose by 7.44 per cent in July, compared to 6.5 per cent in Germany, 3.2 per cent in the US and 5 per cent in France. The United Kingdom, for which data is available as of June, had a higher inflation rate of 7.9 per cent. India has the second-highest among the seven largest world economies as per the latest available inflation data for each country (chart 1).

Inflation’s surge to a 15-month high in July was driven by soaring food prices. At 11.51 per cent, food inflation for the month of July was the highest since April 2020 when it was 11.73 per cent.

India’s overall inflation is also higher than the latest available inflation figure for many key emerging market countries. This includes Brazil (3.99 per cent), Russia (4.3 per cent), South Africa (5.4 per cent). China had negative inflation of -0.3 per cent. This means that prices fell in the latest month compared to the same period last year. Falling prices are also viewed negatively as it can indicate a weak economic recovery after the pandemic.

A dozen states have reported higher inflation numbers than the all-India figure.  This includes Rajasthan (9.66 per cent), Jharkhand (9.16 per cent), Tamil Nadu (8.95 per cent), Odisha (8.67 per cent) and Uttarakhand (8.58 per cent). The states and union territories which recorded lower inflation than the all-India figure include Delhi, Assam, Jammu and Kashmir, West Bengal and Chhattisgarh. These bottom five states had between 3.5 per cent and 6.5 per cent inflation in July. The Jammu and Kashmir figures pertain to the prices and weights of the combined union territories of Jammu and Kashmir, and Ladakh which formed the erstwhile state of Jammu and Kashmir (chart 2).