Why in News?
A recent report of SBI shows that the migration of labour from low-income states to high income states in search of employment opportunities is resulting in higher inflation in high income States in the South such as Kerala and Tamil Nadu.
- State-wise analysis – High-inflation states - Among all 35 states/UTs during the period FY13 and FY25 Tamil Nadu inflation is higher than all India inflation for 9 years out of the last 13 years.
- Among the States, Kerala clocked the highest inflation rate of 7.3% in Feb, followed by Chhattisgarh 4.9%.
- Low-inflation states- Gujarat and Punjab has lower inflation than all India inflation for 9 years from the last 13 years.
- Northeast and Western regions have had lowest inflation against higher inflationary trends displayed by Southern and Eastern region.
- The region wise analysis of retail prices shows that southern states display a higher trend in prices for items like vegetables, cereals and most of the pulses.
- Primary trends suggest higher taxes levied on petrol/diesel, liquor, as also registration charges for automobiles and flats by the Southern states could be the driver of higher inflations.
- Going by the share of sales tax collection by states, Southern states hold the highest share, followed by Northern region.
- India’s Consumer Price Index (CPI) inflation moderated to 7-month low in Feb’25 due to easing in food and vegetable prices, inflation in bigger states continued to outstrip the all-India inflation rate of the same month.
- Higher Rural inflation - There are 9 States among major states, where inflation in rural areas is higher than the all-India rural inflation. Similarly, there are 8 States where urban inflation is higher than all India urban inflation.
- Reason- Higher food prices and the rural basket of food items weight is higher than the urban weights.
- Compound Annual Growth Rate (CAGR) - High income states have an average food inflation CAGR% of 5.26%, above national level CAGR% of 5.18 from FY14.
- Middle income group have an average CAGR% of 5.03% - and lower-income group’s average CAGR is at 4.95% during the same period.
- This shows the purchasing power of higher income groups has higher inflation.
Reference
The Hindu - SBI study on Inflation
