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data | Rice, wheat drive up inflation, but southern states keep prices low

Food inflation highest since 2014, crosses 15% mark in West Bengal, Rajasthan and Uttar Pradesh

Food inflation highest since 2014, crosses 15% mark in West Bengal, Rajasthan and Uttar Pradesh

After falling for three consecutive months, India’s retail inflation picks up 7% in August 2022, A key factor behind this increase was the reversal in retail food inflation which declined to 6.7% in July, but rose again to 7.6% in August. In turn, the rise in food inflation was driven by rising grain prices which rose to 9.5% in August – the highest since February 2014.

While overall food inflation was high, major states saw wide variation. Notably, the southern states overcame the trend and recorded very low levels of food inflation in August. When the major states were compared for retail food inflation, Tamil Nadu, Andhra Pradesh, Kerala and Karnataka were at the bottom of the list. In these four states, food inflation for August was 5% or less. Food inflation was also lower than the national average in Telangana (6%).

In contrast, the western states of Gujarat (11.5%) and Rajasthan (10.4%) topped the list with retail food inflation of over 10% in August. Other states where food inflation was higher than the national average include West Bengal (10.3%), Uttar Pradesh (9.2%), Maharashtra and Uttarakhand (8.5%).

chart 1 Shows India’s overall retail inflation and food and beverage retail inflation since 2019. Overall retail inflation, after rising to 7.79% in April 2022, remained soft for three consecutive months. But the trend reversed in August 2022 with retail inflation touching the 7% mark. In the case of food and beverages retail inflation, it remained soft for three consecutive months, after rising to 8.1% in April 2022 – the highest in 17 months. But like retail inflation, the trend reversed here in August.

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chart 2 Plots item-wise retail inflation in August 2022 for all food-related products on the vertical axis. The chart also plots the weights of those items in the inflation calculation on the horizontal axis. Retail inflation of rice and wheat/wheat flour – from sources other than PDS – which bear the most weight in food-related items, rose to 6.9% and 15.7%, respectively, in August 2022. In August, rice inflation was the highest in previous years. 20 months while wheat/wheat flour inflation was the highest since at least January 2015. In fact, inflation of wheat/wheat flour has risen in this financial year, registering more than 9% of retail inflation each month.

Due to the increase in local prices, the government Export ban on broken rice On September 9 and made an export duty of 20% mandatory on various grades of rice. Following the ban on wheat exports in mid-May, demand for Indian wheat flour increased, leading to a rise in local prices. Hence, towards the end of August, India also banned wheat flour to rein in the prices.

Table 3 Reflects state-wise food and beverage retail inflation in August. The southern states of Tamil Nadu, Andhra Pradesh, Kerala and Karnataka are at the bottom of the table while Gujarat and Rajasthan are on top.

Table 4 Reflects state-wise retail inflation in August 2022 for cereals, meat and fish and vegetables – the three sub-groups that carry the highest weighting under the “food and beverage” group. Barring Kerala in the cereals sub-group, all the three sub-groups in the southern states recorded the lowest level of retail inflation. In the cereals sub-group, Tamil Nadu, Telangana and Karnataka recorded retail inflation below 3%. In the meat and fish subpopulation, several southern states registered deflation. And in the vegetable sub-group, inflation was 5% or less in Karnataka, Andhra Pradesh and Tamil Nadu.

Source: Mospi

Read also: data | Rural inflation at peak in all states except Tamil Nadu and Kerala

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