A relentless price spiral in rural India

Rural India is in a vice-like grip of inflationary pressures.

In November, the consumer price index for both agricultural labour and rural labour has risen by 15.65% over its level during the same month of the preceding year.

And, food inflation stood even higher at 18.14%.

In the preceding month, the point-to-point inflation was 13.73% for agricultural labourers and 13.51% for rural workforce.

Thus, over a span of a mere month, the price spiral has taken an even more pronounced form, with a jump of nearly 200 basis points.

Juxtaposed against this grim news in the rural heartland, the trend in wholesale price index — the official measure of inflation — is definitely benign.

In November, the WPI-based inflation rate was 4.78% compared with 1.34% in
October; even the food price inflation, though high, had ruled lower at 16.71%.

However, since the movement in the wholesale index impacts on the prices at the retail level after a lag, it is clear that rural masses must brace for further bouts of price increases in the months ahead.

Since food inflation is more than the overall rate of inflation, it is equally clear that the countryside may have to contend with higher prices of essentials on top of what they have been experiencing of late.

Though the point-to-point inflation has been used to gauge the underlying price situation, better insight into what is happening at the grassroots can be had from the study of the build-up since March and the incremental jump in prices on a sequential basis.

From both these criterion, the rural folk — the most vulnerable segment of the population — must brace for the worst after having already gone through harrowing times.

So far this fiscal, whether it is the index for agricultural labour or the one for rural labour, the rise has been sustained and on an accelerated pace.

From a mere 1.08% in April 2009 over March 2009, the spurt has been sharp, climaxing in a nearly 15% climb by November.

On a sequential basis, the surge in both the indices in each of the months from April to November has been been 1% or more with July witnessing a strident increase of 3%. In November, the monthly jump was almost 2%.