Rural India Faces Higher Inflation Rates Than Urban Counterparts

New Delhi, Aug 22 (KNN) Recent economic data reveals that rural areas in India have been experiencing higher inflation rates compared to urban regions for over a year.

This trend is particularly pronounced in predominantly rural states such as Bihar and Odisha, where inflation rates have consistently surpassed the national average, as reported by businessline.

According to official figures, rural inflation reached 7.6 per cent in July 2023, exceeding the urban rate of 7.2 per cent.

Although both rates have since decreased, the disparity persists. As of July 2024, rural inflation stood at 4.1 per cent, while urban areas reported a rate of 3 per cent.

Experts attribute this divergence to several factors. Madan Sabnavis, Chief Economist, Bank of Baroda, highlights the significant impact of food prices on rural inflation.

"Food products carry substantial weight in the overall inflation calculation, especially in rural areas," Sabnavis stated.

Ramendra Verma, Partner, Grant Thornton Bharat, points to differences in energy costs and housing as contributing factors.

"Rural areas rely more on traditional fuels like firewood and charcoal, which have seen price increases," Verma noted.

He also mentions that urban areas benefit from lower housing inflation, a component not included in rural Consumer Price Index (CPI) calculations.

The impact of this trend is evident in state-level data. In July 2024, Bihar, Assam, and Odisha reported the highest retail inflation rates at 5.9 per cent, 5.1 per cent, and 4.8 per cent, respectively.

These states, with over 80 per cent of their populations residing in rural areas, have been particularly affected by rising food prices.

Nationwide, the Food and Beverages category experienced the highest inflation rate at 5.06 per cent, followed by Pan, Tobacco, and Intoxicants at 3.02 per cent.

Rural food inflation outpaced urban food inflation, a significant factor given that food and beverages account for 54.18 per cent of the rural CPI basket compared to 36.29 per cent in urban areas.

Sabnavis cautions that controlling inflation remains challenging due to the complex supply chain.

"The final price consumers pay is influenced by multiple layers of costs, including production, distribution, and logistics expenses at various market stages," he explained.

As rural India continues to grapple with higher inflation rates, policymakers face the challenge of addressing these economic disparities and their impact on the country's diverse population.

(KNN Bureau)