While overall inflation has come down substantially over the past three years, inflation for the rural consumer has been significantly higher than for the urban population. The accompanying chart, which has the point-to-point Consumer Price Index (CPI)-based inflation for the last three years (August 2017 compared to August 2014) has the details.

What is intriguing is that even for farm prices, such as for pulses or for milk and even cereals, consumer prices have risen more in rural India. Prices of health and education services too have moved up faster in rural areas.

With farm incomes being under pressure after two years of bad monsoon, the rise in rural prices could explain the sluggishness in rural demand, as well as the relative robustness of urban demand.

The silver lining is that the latest CPI numbers for August show that rural inflation has been slightly slower in the past one year than urban inflation. This trend needs to continue.