Assam, Odisha among states clocking high rural inflation than urban in FY23

The recent Economic Survey for the financial year 2022-23 had a very detailed and threadbare analysis of inflation in rural areas that has been higher than urban areas in the months that just preceded the tabling of the report in the Parliament last week.

It said Consumer Price Index (CPI)-based Combined inflation increased in most of the states in FY23 as compared to FY22.

Among the states, Telangana, West Bengal, Maharashtra, Madhya Pradesh, Haryana, and Andhra Pradesh saw especially high rates of inflation in FY23 as compared to others.

Fuel and clothing were the major contributors to the surge in inflation.

Within the states as well, most witnessed higher rural inflation than urban inflation in the current year.

This was mainly due to higher food inflation in rural areas.

Assam, Haryana, Madhya Pradesh, Manipur, Mizoram, Odisha, Uttarakhand, West Bengal, and Delhi experienced higher rural inflation than urban inflation.

The survey said in the rural sectors of Haryana, Mizoram, and West Bengal it was because of higher ‘food and beverages’ and ‘clothing and footwear’ inflation, while it was high in rural sectors of Madhya Pradesh, Manipur and Assam, due to ‘fuel and light’ segments.

Food, clothing, and fuel were the major contributors to higher inflation in urban areas of Bihar, Meghalaya, and Tripura.

This high rural inflation would not have been noticed much except for the fact that in some of the states they could influence the polls.

Of the states the survey mentioned that have experienced higher rural inflation than their urban counterparts in FY23, Mizoram will go to the polls this year while Madhya Pradesh in next calendar year.

Whether high rural inflation impacts the results will depend upon the ability to control prices, which in any case has started softening due to weakness in global markets.

The survey also said that the growth in real rural wage in FY23 has been negative due to elevated inflation. It hoped real rural wages would rise going forward due to the easing of international commodity prices and domestic food prices.

“Nominal rural wages have increased at a steady positive rate during FY23 (till November 2022). In agriculture, the year-on-year (YoY) rate of growth of nominal wage rates in agriculture was 5.1 per cent for men and 7.5 per cent for women, during the period April-November 2022. In non-agricultural activities, the growth of nominal wage rates was 4.7 per cent for men and 3.7 per cent for women, during the same period,” the survey said.

However, growth in real rural wages has been negative due to elevated inflation.

“Going forward, as inflation is expected to soften with the easing of international commodity prices and domestic food prices, it is expected that this will translate into a rise in real wages,” it added.

The data shows that the survey's predicament is showing some signs of fruition. In November 2022, real rural wage growth of general agriculture workers’ male, which is sometimes considered as a benchmark for the rural wage scenario, for the first time in this financial year (FY23) rose to 0.79 per cent, which was the highest for the financial year.

Though the growth is just marginal, with inflation being on a downward trajectory, it is hoped that in the coming months, wage growth in real terms will further rise.

This, if sustained, could be the single-biggest factor that would support a rural recovery in the coming years.