Odisha and Telangana have recorded the highest rate of Consumer Price Inflation (CPI) during December 2019. Both states witnessed inflation rate escalating to 9.4 per cent, surpassing the national average of 7.35 per cent in the period, a study by CARE Ratings showed, quoting figures from the Ministry of Statistics & Programme Implementation (MoSPI).
The study illustrates that 22 states including Union territories clocked CPI rates exceeding the national average. Uttar Pradesh was next to Odisha and Telangana with an inflation rate of 8.9 per cent.
In Odisha, the inflation rate was unusually high in December 2019 largely on account of steep food prices.
Food inflation in December at 12.2 per cent was at a six-year high chiefly owing to a negative base effect and significant spike seen in case of vegetable prices and pulses. All components in the food basket have seen an increase in inflation over a month ago. The vagaries of monsoon have adversely affected food production and have had a bearing on food inflation.
The study further substantiates that prices of betel, tobacco grew by 3.4 per cent in December 2019, marginally higher than the 3.3 per cent growth in the previous month and lower than 5.7 per cent growth in the same period a year ago.
The urban CPI inflation rose to a six-year high of 7.5 per cent in December 2019 compared with 5.8 per cent in the previous month while the rural CPI inflation rose to over five-year high of 7.3 per cent, further narrowing the gap between these two sub-indices. The increase in rural inflation was triggered by rise in food prices while urban inflation was higher on account of a mix of food higher food prices and prices of the miscellaneous component.
“Both rural and urban inflation have been above seven per cent having driven by double digit growth in food prices in both regions. The rise in vegetable inflation to more than six-year high along with inflation in the pulses segment rising to a more than 3 year high have been the chief reasons driving inflation. It is important to note here that the high food inflation in December, 2019 has come against a negative base of the previous year. In addition, significant spike in the transport and communication segment has also weighed on inflationary pressures”, the study noted.
According to CARE Ratings, inflation is likely to moderate marginally in the coming months but would continue to remain at elevated levels. Statistically, CPI inflation will be handicapped by low base effect in January which will increase in the next two months. On the other hand, moderation in prices of onions and other vegetables which has already been witnessed in January could support the moderation in overall inflation.