New Delhi: Much like the post-COVID-19 economic recovery in the country, India’s inflation trajectory is also following a K-shape, hurting rural consumers more, HSBC has noted in a report.
Largely due to higher food inflation, price rise for rural consumers was 1.1 percentage point higher than for their urban counterparts in May, PTI quoted the bank’s report as saying.
“The same developments, driving a K-shaped recovery, seem to be driving K-shaped inflation dynamics,” the HSBC report by its chief economist Pranjul Bhandari stated. Pointing to the ongoing heat wave, the report said higher food and lower core inflation are coexisting because of crop damage and livestock mortality, pushing up the former.
The government did cut several fuel prices but many of the fuels like petrol, diesel and LPG are not commonly used in rural areas, and so this meant rural prices were higher than urban, it said. The report noted that food inflation dynamics are more “mysterious” because the assumption is that rural areas – growing the food – should suffer less than the urban pockets.
“If rains don’t normalise over July and August, the resultant food stress of 2024 could arguably be worse than in 2023, given low stocks of wheat and pulses in the granaries,” it said.
As The Wire has reported, rural inflation has been combined with rural wage stagnation, leading to widespread distress. Real rural wages contracted in as many as 25 of the 27 months up to February 2024, according to CMIE data. February saw a big contraction, of 3.1%. The highest contraction recorded before this was 2.9% in September 2022.