Why is inflation rate different across States?

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Last Updated05/09/2022

India’s economy grew at a slower-than-expected 13.5% in the first quarter of the year.
Private consumption picked up, but inflation has been a dampener.

Retail inflation shot up to an eight-year high of 7.79% in April, but cooled slightly to 6.7% by July.
In several States and UTs, including Assam, Andhra Pradesh, Gujarat, Haryana and Telangana, consumers continued to face over 7% inflation in July
11 States, including West Bengal, Uttar Pradesh and Bihar, saw accelerated price rise in the month.

14 States as well as 3 UTs, including Jammu and Kashmir, have faced higher than the national inflation (averaging over 7%).
Consumers in Telangana (8.32%), West Bengal (8.06%) and Sikkim are worst-hit with 8%-plus inflation.
A dozen States have recorded retail price rise of less than 6% through 2022,
Kerala (4.8%), Tamil Nadu (5.01%), Punjab (5.35%), Delhi (5.56%) and Karnataka (5.84%).
Manipur, Goa and Meghalaya averaged inflation below 4%, at 1.07%, 3.66% and 3.84%, respectively.

Food price inflation
Dropped to a 5-month low of 6.8% in July
A key differentiating factor for States’ inflation experience.
States that are not major crop producers have higher food inflation as transport costs are added on
States with predominant rural areas
States having rural areas also clock more inflation
- Reason: CPI for rural areas assigns a higher weightage to food,.
Consumption patterns and divergences
Influence variations among States.

Identifying factors of higher inflation (or lower) in some States vis-à-vis others
Could help policy makers address those pressure points more specifically to provide lasting relief to consumers.
Centre and States can coordinate to pinpoint and address the price triggers that may not be driven by global headwinds but local factors.