High price of fuel have impacted purchasing power of urban and rural poor

New Delhi: Though  food inflation may be  on southward trend in the fiscal year 2021-22, but high price of fuel  and other segments , have hugely impacted the purchasing power of the population with urban poor (bottom 20 per cent) facing the heat while rural population has been hit hardest.

According to a  financial analytical company Crisil the impact that inflation on different segments of the population, poorer segments are facing the pressure from price rise more due to high prices of fuel and food, which have the  highest weights for the bottom 20 per cent. Also, urban inflation in these two commodity groups was higher than that in the rural areas.

Food inflation fell sharply from 5 per cent at the start of this fiscal to 0.7 per cent in September. Fuel inflation rose from 8 per cent to 13.6 per cent.

 The burden of rising prices on low income group has impacted their day to day spending  of groups differs across income classes, Crisil  report pointed out.

According to National Sample Survey Organisation (NSSO) mapping of expenditure,  for rural areas, food constitutes the majority share in expenditure for the bottom 80 per cent of the population. For the upper 20 per cent, core takes the largest share. While the share of fuel is lower than those of food and core for all income groups, it is relatively higher for the bottom 20 per cent than the rest, the analysis found.

In urban areas, too, food and beverages is the largest expenditure item for the bottom 80 per cent though the respective shares are lower than their rural counterparts. Food inflation has also been higher in urban than rural areas this fiscal.

Just like in the rural areas, fuel accounts for a larger expenditure share for the bottom 20 per cent compared with other income classes in the urban areas. Fuel inflation in urban areas has been higher than in rural areas in this fiscal so far.

With regard to the consumption pattern of the poor, the analysis found that cereals, fuel and vegetables are the top three commodities for both rural and urban areas. The pressure from high fuel inflation is likely to have been offset by lower inflation in cereals/vegetables this fiscal. However, six out of the 10 commodities have seen inflation above 6 per cent in rural areas this fiscal. In urban areas, there are five such commodities. This implies inflationary pressures are still significant for the poor.

In effect, this would mean that containing food inflation, particularly in cereals and vegetables, is the key to saving the poor from price pressure.

The recent cooling in food inflation — even as non-food inflation remains high — would have benefited the poor more than the rich. However, it also needs to be kept in mind that the share of fuel in total consumption is more for the poor. Hence, the double-digit fuel inflation seen for a major part of this fiscal may have offset the benefit of falling food inflation. – INDIA NEWS STREAM