Wednesday, 09 Oct, 2024
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Jharkhand has the lowest inflation rate, emphasizing regional disparities across the country. The Consumer Price Index data shows that Bihar has the highest combined inflation rate among the 22 states and union territories, at 5.87 percent.
Bihar recorded the highest inflation rate among states and Union territories in July, closely followed by Assam and Uttar Pradesh. In contrast, Jharkhand reported the lowest inflation rate, highlighting significant regional disparities across the country. According to the Consumer Price Index (CPI) report, Bihar registered the highest combined inflation rate among the 22 states and union territories listed, reaching 5.87 per cent. Assam followed with an inflation rate of 5.11 per cent, while Uttar Pradesh recorded 4.57 per cent. On the lower end, Jharkhand had the lowest inflation rate at 1.72 per cent, with Delhi at 2.06 per cent, Chhattisgarh at 2.16 per cent, and Rajasthan at 2.53 per cent.
Notably, the government collects retail price data from 1,114 urban markets and 1,181 villages across all states to measure inflation, a key factor influencing people's income and overall economic growth.
Retail inflation for urban consumers fell to just under 3 per cent, a significant drop from 4.4 per cent in June, while rural consumers saw a higher inflation rate of 4.1 per cent, down from 5.7 per cent the previous month. Food prices rose more sharply in rural areas, with a 5.9 per cent increase compared to 4.6 per cent in urban regions. In June, rural food inflation was lower at 9.15 per cent, while urban food prices had surged by 9.6 per cent.
The inflation gap between urban and rural areas persisted in July. This disparity is largely driven by higher food prices and the greater share of food items in the rural consumption basket (54.2 per cent) compared to urban areas (36.3 per cent).
A comprehensive analysis of state-wise CPI data demonstrates that most states had inflation rates below the national average, with only six out of 22 states exceeding this threshold. However, significant rural-urban inflation disparities were observed, as most states experienced higher inflation in rural areas compared to urban regions. Only four states reported higher inflation in urban areas.
Also, the disparity in inflation rates among states and Union territories is influenced by various factors, including supply management and the impact of weather-related events.
Retail inflation rate saw a sharp decline from the four-month high of 5.1 per cent recorded in June to a nearly five-year low of 3.54 per cent in July, marking the slowest price increase since September 2019. More significantly, this is the first time since 2019 that the inflation rate has dipped below the 4 per cent median target set by the Reserve Bank of India (RBI) in its monetary policy. Additionally, food inflation has fallen below 8 per cent for the first time in nine months.
The Ministry of Statistics and Programme Implementation (MoSPI) noted that in July 2024, there was a decline in inflation across all groups, with significant reductions observed in the vegetables, fruits, and spices subgroups.
On August 8, the central bank held its benchmark repo rate steady at 6.5 per cent for the sixth consecutive meeting, focusing on measures to contain sticky inflation.
The combined Consumer Food Price Index (CFPI), which reflects food inflation, experienced a significant drop, falling to 5.42 per cent in July 2024 from 11.51 per cent in July 2023. Spices recorded the lowest inflation rate at -1.43 per cent, followed by oils and fats at -1.17 per cent. Non-alcoholic beverages saw a 2.29 per cent increase.
A crucial part of the CPI is the household consumption basket. The weights given to different items in the CPI baskets for each state represent how much of a household's total spending is dedicated to those items. These proportions come from the Consumer Expenditure Survey (CES), carried out by the National Sample Survey Organisation (NSSO), which collects data on how households spend their money in both urban and rural areas across the country.
The current CPI series uses data from the CES conducted between July 2011 and June 2012. This survey includes both rural and urban areas in all states, and the CPI Urban and CPI Rural weights are based on the share of items in household spending for each state.
The Reserve Bank anticipates some relief in food inflation due to the pick-up in the south-west monsoon, strong sowing progress, and elevated cereal buffer stocks. Global food prices also showed signs of easing in July after increases since March 2024.
Assuming a normal monsoon, the RBI projects a CPI inflation rate of 4.5 per cent for 2024-25, following a 4.9 per cent inflation rate in the first quarter. Forecasted rates are 4.4 per cent for Q2, 4.7 per cent for Q3, and 4.3 per cent for Q4.
