Home / Economy / Majority of Indians live in states with high inflation

NEW DELHI : Six in 10 Indians live in states where retail inflation exceeded the national average of 7% in August, a Mint analysis of government data suggests. This was despite the fact that only 10 out of the 22 states for which such data is available had above-average inflation, which means the highest inflation rates in India are concentrated in some of the most populous states.

Since the beginning of the year, India has been facing steep retail inflation, rising to as much as 7.79% in April. While inflation has moderated from that peak due to steps taken by both the RBI and the government, and easing global price pressures, the analysis shows a gloomier picture at the state level.

In July, the scenario was worse. Even as inflation touched a five-month low of 6.71%, a greater rise in everyday prices was witnessed by 64% of the population. As price pressures began easing after April, the share of the population facing higher inflation than the national average had declined from 63% to around 50% in May and June. But it rose back up again in July and August.

West Bengal reported the highest retail inflation of 8.94% in August, followed by Gujarat (8.22%), Telangana (8.11%), Maharashtra (7.99%) and Madhya Pradesh (7.83%). In India’s most populous state, Uttar Pradesh, the inflation rate was 7.62%. Bihar was the only one among the five most populated states to record an inflation rate below the average, coming in at 6.31%.

Even as inflation varies drastically across states, all of the 22 states for which the statistics ministry releases data saw an inflation rate above the RBI’s medium-term target of 4% in every month since the beginning of the current financial year.

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Overall inflation has been above the upper tolerance limit since January and came at 7% or more in four of the past eight months.

With the average print running at 6.9% in the July-August period, inflation in the second quarter is unlikely to fall below 6% unless September records a rate of as low as 4.1%.

Given an unfavourable base effect and upward price pressures from food and services, economists expect an elevated print in September as well, marking a failure of the monetary policy.

The RBI is deemed to have failed in its mandate if the average inflation remains outside the 2-6% band for three consecutive quarters.

“With inflation materially above the upper threshold, inflation will likely remain a policy priority. We expect another 35-basis-point hike in the September meeting, followed by a 25-basis-point hike in December," Nomura said in a report on Tuesday.

The RBI’s monetary policy statement is due on 30 September.

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