WHAT’S FEEDING INFLATION IN INDIA Present circumstances: ∙Globally, the rate of product inflation is decreasing as demand and input costs go down. Yet, India is experiencing rising prices. ∙Despite the fact that demand for high-touch services is increasing more slowly than anticipated, services inflation is nevertheless significant globally. In India, the cost of living is decreasing. Urban demand growth as a source of inflation: ∙The decrease in rural consumer spending in the second half of 2021 marked the beginning of everything. ∙The inconsistent monsoon rains, increased inflation, and the spread of the March heatwave during 2022 led to a mediocre harvest and a significant decline in rural income. ∙Around this time, demand rose in urban areas. Lockdowns ceased, and employment in cities resumed. During the epidemic era, workers who had fled for their homes returned to the big cities. ∙Every time an Indian worker moved from a rural to an urban region, their earnings climbed. Rising salaries correlated with high expenditure. This made the demand shortfall in rural areas even more obvious. ∙The latter few months of 2022 saw an upsurge in winter agricultural sowing. Since more labour were needed on the ground, agricultural pay rose. ∙In fact, after accounting for inflation, they went above pre-pandemic levels. Other rural indicators, such as the manufacturing of consumer non-durables, which grew swiftly from October levels, also pointed to stronger revenues. ∙By the end of 2022, the shift in labourers moving back to urban areas and the ensuing growth stimulus had essentially come to an end. Following that, indices of urban demand, such as the manufacturing of consumer durables, began to fall. Fair enough, demand in rural areas is only slightly rising while it is somewhat decreasing in metropolitan areas. Neither is […]
