Price pain greater in rural India due to rising rural food inflation: Crisil

Rural India continues to feel a sharper price pinch with inflation inching up in rural areas to 5.4 per cent from 5.3 per cent while urban inflation eased markedly to 4.1 per cent from 4.8 per cent.

- NIVEDITA MUKHERJEE

Inflation moved in opposite directions in urban and rural areas in March, according to a CRISIL report.

The rating agency attributes this to rising food inflation in rural areas which crept up to 8.6 pr cent as compared to 8.4 per cent in urban India. Urban food inflation declined compared with the previous month when it was 9.2 per cent. The effect of inflation varies with income groups since the share of spending on food, fuel and core categories differs across classes. Items such as food and fuel, being essential, occupy a greater share in the consumption basket of lower income classes.

According to CRISIL, higher rural food inflation relative to urban was primarily a result of higher rural inflation in vegetables and cereals. Additionally, fuel inflation was significantly lower in urban areas (-8.2 per cent) compared with rural areas (-0.2 per cent). Since the weight of core items is higher in the urban consumers' basket, soft core inflation benefited urban inflation to a greater extent. Accordingly, all income segments in rural areas faced a higher burden than their urban counterparts.

The top urban segment faced the lowest burden since core items occupy a 60 per cent share in their consumption basket. Due to high food inflation, the poorest segment, particularly in rural India, faces a higher burden, shows the CRISIL report.