Effects of Domestic Migration in India

Prelims – Economic and Social Development.

Mains – GS III| Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment | Inclusive growth and issues arising from it.

Why in news?

A research report recently released by the State Bank of India (SBI) highlighted that Migration of labor from low-income states resulting in inflation in high income States in the South such as Kerala and Tamil Nadu.

• Labor Migration and Inflation – Labor migration from low-income to high-income states is contributing to higher inflation in southern states like Kerala and Tamil Nadu.
• This migration is linked to employment opportunities and increased purchasing power.

Purchasing power refers to the value of a currency or income in terms of the goods and services that can be purchased with it, meaning the ability to buy goods and services.

• Regional Inflation Variations – Southern and Eastern regions show higher inflation trends.
• Northeast and Western regions have the lowest inflation rates.
• Post-pandemic (FY21 to FY25), inflation indicates the following:
  • Northeast – 3.4% decline.
  • Southern region – Only 2.6% decline.
• Labor Migration and Economic Dynamics – Workers moving from low-income to high-income states create unique economic ripple effects including:
  • Enhanced purchasing power in destination states.
  • Increased demand for goods and services.
  • Potential upward pressure on local prices.
• Rural-Urban Inflation Divide – Rural inflation is higher than urban inflation and the reasons for it include:
  • Higher food prices.
  • Rural food basket weight is 54.2% (compared to 36.3% in urban areas).
• Fiscal Policy and Inflation – The report suggests that higher taxes levied by Southern states on items like petrol/diesel, liquor, and property registration contribute to inflationary pressures.
• The high sales tax collection in southern states, indicates that state level fiscal policy has a large impact on regional inflation.

Reference

1. The Hindu | Migration of Labor
2. PIB | Empowering India's Migrant Workforce