Inflation hurt poorer states more than rich ones post pandemic

India's inflation hurt poorer states more

India’s poorer states have borne the brunt of inflation more than richer ones post pandemic, according to a Moneycontrol analysis.

At 5.9 percent, average inflation in the five poorest states in the country—Bihar, Uttar Pradesh, Assam, Madhya Pradesh and Jharkhand— between January 2022 and June 2024 was higher than the five richest states in per capita terms.

Telangana, Delhi, Haryana, Karnataka and Tamil Nadu, which count as richest large economies of India, had a lower inflation of 5.78 percent during this period.

This marks a complete reversal from years leading up to the pandemic when poorer states had lower inflation levels than rich ones.

A Moneycontrol analysis shows that inflation has galloped faster for poorer states compared with the rich.

The rich states had a higher inflation rate at 4.02 percent compared with 3.92 percent for poor ones in the three years leading up to the pandemic (January 2017-March 2020).

While inflation increased 1.76 percentage points for the top five states between pre-pandemic and post-pandemic period, the increase was 2 percentage points for rural areas.

One significant reason for this switch is rural inflation outpacing urban in the post-pandemic period, especially due to higher food prices.

Rural inflation has been higher than urban inflation in 25 of the last 30 months, with the gap between the two increasing.

Rural inflation was 1.2 percentage points higher than urban inflation in the first quarter of FY25 compared with 0.8 percentage points in the previous quarter (Q4FY24) and 0.5 percentage points two years ago.

Food inflation has clocked over 6 percent increase in 21 of the last 30 months until June.

In June, food inflation had increased to 9.4 percent from 8.7 percent in the previous month, which led to overall inflation crossing the 5 percent mark.

Food has a higher 47.3 percent weight in the rural basket, compared with 29.6 percent in the urban areas.