Food Inflation Patterns in India

A recent report by the State Bank of India (SBI) reveals that food inflation has declined more sharply in middle and high-income states compared to their lower-income counterparts. This trend, observed over the past ten years, highlights significant variations in food inflation patterns across Indian states.

The analysis attributes this pattern to workforce movement from economically weaker states to more prosperous regions seeking improved job prospects. This population shift is resulting in quicker disinflation in prosperous states, while lower-income regions experience a slower decline in food inflation.

Convergence Towards RBI's Inflation Target

The report also indicates that retail inflation across Indian states is progressively aligning with the Reserve Bank of India's 4 per cent target. Employing Sigma-type analysis methods, the report reveals that the variation in inflation rates between states has reduced over the last ten years.

"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," it stated.

Gross Fixed Capital Formation (GFCF) Distribution

Significant changes in Gross Fixed Capital Formation (GFCF) distribution across income categories are also mentioned. Lower-income states increased their GFCF share by 6.44 per cent between FY15 and FY23, while middle-income states maintained roughly 5 per cent. Prosperous states demonstrated substantial growth in GFCF share, rising from 4.17 per cent in FY15 to approximately 30 per cent in FY23.

The document warns that these differences in GFCF and population movement patterns might intensify inflation pressures in wealthy states, highlighting the importance of balanced regional development and targeted interventions.