CRISIL’s argument is based on the fact that the inflation burden varies across income groups, as the share of expenditure on food, fuel and core categories varies among classes.
Detailing the retail inflation print for October, which rose to 4.5% from 4.3% in September but declined sharply from 7.6% year-on-year, Crisil says the richest 20% of the population, who live on non-food The poorest 20%, who pay the most for food items and whose prices have fallen, suffered the most from rising prices in the month.
CRISIL’s argument is based on the fact that the inflation burden varies across income groups, as the share of expenditure on food, fuel and core categories varies across categories.
According to the National Sample Survey Organization (NSSO) Consumer Expenditure 2011-12, the poorest 20% of the population spend the majority of their income on food, while the richest 20% do so on staples.
Using NSSO data, the agency estimated average spending patterns across three income groups—the bottom 20, middle 60 and upper 20%—and mapped them with current inflation trends to find out which one is the highest. Inflation was hit. The upper 20% of the income group in urban areas in October when compared to 4.6% in September it increased by 5%.
The report said urban inflation in October was driven by fuel and core inflation, which together account for 65% of their commodity basket.
On the other hand, the lowest inflation was faced by the bottom 20% in rural areas, as the October print declined to 3.9% from 4% in September, mainly driven by lower food inflation.
Thus it can be inferred that the richest 20% faced higher inflation than the poorest 20% due to rising core inflation and falling food inflation, the agency says.
While the gap widened in October over September in rural areas as inflation fell more for the bottom 20%, but in urban areas the gap narrowed as inflation rose for the bottom 20% in addition to the top 20%.
While the top rural 20% faced 4.4% inflation in October, the top urban 20% did so from 5%, the rural 60%, the middle income group at 4% and 4.9%, the urban top 60% and the bottom rural 20%. did. It had suffered a loss of 3.9 per cent while it was 4.9 per cent for the urban lower level 20 per cent.
Going forward, CRISIL expects retail inflation to average 5.5% this fiscal, down from 6.2% in the previous fiscal as the moderation in food inflation and higher base effect will reduce year-on-year headline inflation. are supposed to.
As agriculture growth is expected to remain healthy at 3-3.5%, as a normal monsoon, expected record kharif production and adequate reservoir levels augurs well for rabi production, keeping food prices in check.
On the other hand, non-food inflation is expected to continue to face upward pressures in global commodity prices. Nevertheless, the impact of the recent excise duty cuts on petroleum products will help soften fuel inflation in November and will also be filtered out in the next few months as the effects of the second round on other parts of the CPI.
On the other hand, increased input costs will keep pressure on core inflation, as producers will partially pass them on to the final consumers.
Consumer price inflation rose to 4.5 per cent in October, from 4.3 per cent in September, but peaked at 7.6 per cent in October 2020.
Core inflation, on the other hand, held steady at 5.9% as of September, raising urban inflation in October to 5% from 4.6 per cent in September, while rural inflation remained stable at the same level as September at 4.1%.
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