New Delhi: According to a report from the State Bank of India (SBI), middle and high-income states in the country have seen a more pronounced decrease in food inflation compared to their low-income counterparts.
The report highlights notable variations in food inflation patterns across Indian states over the past ten years, indicating a significant downward trend in food inflation among wealthier states.
It noted that "Middle and High-income states have experienced a greater reduction in food inflation over the last decade compared to Low-Income States, as evidenced by a downward shift in distribution."
The report links this trend to the migration of labor from low-income states to high-income states in pursuit of improved job prospects.
It suggests that this movement is contributing to a more rapid disinflation in high-income states, while the reduction in food inflation in low-income states is occurring at a slower pace.
Additionally, the report pointed out that retail inflation across various Indian states is gradually aligning with the Reserve Bank of India's target of 4 percent.
Employing a Sigma-type methodology, the report concluded that the variation in inflation rates among states has been decreasing over the last decade.
The report indicates that both the General Consumer Price Index (CPI) and the Food CPI are moving closer together, with a more pronounced rate of convergence observed in the volatility of headline CPI related to food inflation, which is facilitating a quicker alignment.
Additionally, the report reveals a notable change in the distribution of Gross Fixed Capital Formation (GFCF) among different income groups. From FY15 to FY23, the share of GFCF attributed to low-income states has risen by 6.44 percent, while middle-income states have seen their share remain relatively unchanged at around 5 percent.
In contrast, high-income states have experienced a significant increase in their GFCF share, soaring from 4.17 percent in FY15 to nearly 30 percent in FY23.
The report warns that the growing disparity in GFCF and migration patterns may intensify inflationary pressures in high-income regions. It underscores the importance of promoting balanced development and implementing strategic measures to foster sustainable growth across all areas.
These insights from the report emphasize the complex relationships between migration, inflation, and economic growth in India, highlighting the necessity for comprehensive policy initiatives to tackle regional inequalities.
