New Delhi [India], December 13 : The middle and high-income states in the country have experienced a sharper decline in food inflation compared to low-income states, says a report by the State Bank of India (SBI).
The report revealed significant differences in food inflation trends among Indian states over the last decade. This is reflected in a downward shift in food inflation distribution in wealthier states.
It said "Middle and High-income states have shown higher decline in food inflation in last decade as compared to Low-Income States as reflected in downward shift of distribution"
The report attributes this trend to labor migration from low-income states to high-income states in search of better employment opportunities.
It suggested that this migration is leading to faster disinflation in high-income states, while the decline in food inflation in low-income states remains relatively gradual.
The report also highlighted that retail inflation across Indian states is gradually converging toward the Reserve Bank of India's target of 4 per cent.
Using a Sigma-type methodology, the report stated that it found that the dispersion of inflation rates among states has been narrowing over the past decade.
It added "both CPI General and CPI Food are converging, however the rate of convergence is steeper in headline CPI volatility in food inflation checkmating faster convergence".
Another key finding of the report is the shift in the share of Gross Fixed Capital Formation (GFCF) across income groups. The share of low-income states in GFCF has increased by 6.44 per cent between FY15 and FY23, while the share of middle-income states has remained stagnant at around 5 per cent.
High-income states, on the other hand, have seen a steep rise in their share of GFCF, jumping from 4.17 per cent in FY15 to approximately 30 per cent in FY23.
The report also cautioned that this disparity in GFCF and migration trends could exacerbate inflationary pressures in high-income states. It highlights the need for balanced development and strategic interventions to ensure sustainable growth across all regions.
These findings in the report highlight the interconnected nature of migration, inflation, and economic growth across India, calling for comprehensive policy measures to address regional disparities.
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