A recent report of SBI shows that the migration of labour from low-income states to high income states in search of employment opportunities is resulting in higher inflation in high income States in the South such as Kerala and Tamil Nadu.
State-wise analysis –High-inflation states - Among all 35 states/UTs during the period FY13 and FY25 Tamil Nadu inflation is higher than all India inflation for 9 years out of the last 13 years.
Among the States, Kerala clocked the highest inflation rate of 7.3% in Feb, followed by Chhattisgarh 4.9%.
Low-inflation states- Gujarat and Punjab has lower inflation than all India inflation for 9 years from the last 13 years.
Northeast and Western regions have had lowest inflation against higher inflationary trends displayed by Southern and Eastern region.
The region wise analysis of retail prices shows that southern states display a higher trend in prices for items like vegetables, cereals and most of the pulses.
Primary trends suggest higher taxes levied on petrol/diesel, liquor, as also registration charges for automobiles and flats by the Southern states could be the driver of higher inflations.
Going by the share of sales tax collection by states, Southern states hold the highest share, followed by Northern region.
India’s Consumer Price Index (CPI) inflation moderated to 7-month low in Feb’25 due to easing in food and vegetable prices, inflation in bigger states continued to outstrip the all-India inflation rate of the same month.
Higher Rural inflation -There are 9 States among major states, where inflation in rural areas is higher than the all-India rural inflation. Similarly, there are 8 States where urban inflation is higher than all India urban inflation.
Reason- Higher food prices and the rural basket of food items weight is higher than the urban weights.
Compound Annual Growth Rate (CAGR)- High income states have an average food inflation CAGR% of 5.26%, above national level CAGR% of 5.18 from FY14.
Middle income group have an average CAGR% of 5.03% - and lower-income group’s average CAGR is at 4.95% during the same period.
This shows the purchasing power of higher income groups has higher inflation.
