High inflation forcing people to cut down expenditure

It is known that the poor are much more affected by higher rate of inflation, and that the poorest section of our country live in remote areas and belong to St, SC or Muslim communities. Keeping this in mind, the survey report published by the YouGov last week gives us some insight into the condition of the people.

The survey was conducted in the second week of June on 1,013 urban respondents, who are generally better equipped to fight a hard situation. However, it reveals that the high inflation is affecting a majority of urban Indians with their cost of living going up compared to 2021. Nearly half of the respondents said their cost of living went up a lot, and 31 percent said it went up a little. The rest were not affected.

If this is the situation in urban areas, one can imagine the condition of the rural poor, particularly in context of rural inflation this time being higher in rural areas.

The question is how one may cope with this situation. The survey has thrown light on it too. Urban Indian households, according to the survey, have cut down their expenditure on clothing and accessories, fuel, eating out, gadgets, mobile bill and so on in the last six months. These months wee the time when inflation continuously pushed up the cost of living, and ate into the budgets of the middle class and the poor.

The survey has given us another insight as far as the urban dwellers are concerned, and has reinforced a pattern already known to us. It has revealed that in tier-1 cities half of the respondents claimed their cost of living has gone up a lot, but the percentage was 44 and 43 in tier-2 and tier-3 cities. It is natural as the cost of living is higher in tier-I cities, where often housing is a big problem with both the cost of buying or renting a flat being prohibitive.

Though we do not have any recent study on the effect of inflation in the rural areas, it is known that food, clothing and fuel prices are higher in the remote areas. What comes in their aid is a jugad economy that runs parallel to the formal economy and often evades the statistical counting of the nation’s gross production. However higher food prices are forcing people in remote areas to collect food from natural sources.

Again, while the cost of living is higher in cities, the people in rural areas have less means to cope up with rising prices, particularly of the fuel like cooking gas and kerosene. It not only affects them economically but socially too, as they go back to the use of firewood for cooking and stop lighting the kerosene lamps essential for the studies of the young ones.

Keeping in mind that rural areas are already under stress because of the impact of Covid-19 as many people working in the informal sector have gone back to their rural homes after losing their jobs, the situation is tricky at the moment because this time the pattern of inflation has broken the traditional frameworks. While traditionally urban inflation used to be higher, this year opened with the rural inflation higher than urban areas.

The rural inflation surpassed the urban inflation by 0.2 percentage points in January of this year, and the gap widened in February to 0.83 percentage points. That month, in rural areas inflation went up to 6.38%, though in urban areas it was 5.75%. In March 2022, the gap increased to 1.5% with urban inflation at 6.12% and rural inflation at 7.66%.

In rural areas the food inflation was higher. As far the fuel inflation is concerned, prices are higher in rural areas due to connectivity issues. Meanwhile, according to media reports, the prices of traditional fuel like firewood have also gone up. Again the rise in input costs for farm products is also affecting the rural farmers and the labour wage as well.

As there is no study on the spending patterns of the rural people, we are not aware exactly how they are trying to cope up.

For the records, the wholesale price-based inflation jumped up to a record high of 15.88 percent in May thanks to higher food and crude oil prices. Retail inflation measured by the consumer price index (CPI) grew sharply to 7.79% in April, which was eight-year high. Meanwhile food inflation jumped to 8.38% from 7.68% in March, according to government data released in June.

While the RBI, after ignoring the situation and refusing to see the reality, has now accepted it being worrying, Finance Minister Nirmala Sitharaman still feels things are in control. Perhaps the minister has no other way to bypass the issue, as this time the inflation was induced by fuel price hike for which the union government too was responsible as it did not reduce the taxes on fuels till the water rose up to the level of nose. – INDIA NEWS STREAM