In April, when the country’s retail inflation surged to an eight-year-high of 7.79%, state-wise data showed that Telangana had one of the highest inflation rate in the country: 9.02%. It was behind two other states—West Bengal which had 9.12% and Madhya Pradesh with 9.10%. The retail inflation rate based on the Consumer Price Index (CPI) was 6.95% in March but steadily climbed on the back of rising fuel and food prices. What do these figures actually mean?
The Consumer Price Index measures the change in the price of goods usually consumed by households, and looks at a specific basket of goods that is said to be representative of consumption expenditure. This includes prices of a range of items such as cereals and products, meat and fish, milk and milk products, oils and fats, fruits, vegetables, pulses and products, spices, etc.
In contrast to Telangana, Tamil Nadu (5.37%) and Kerala (5.08%) have recorded inflation rates lower than the national average. While Kerala’s inflation rate has been lower than the national average since the beginning of the pandemic, Tamil Nadu’s has been lower than the national average since January this year.
Table showing comparison of prices this month and last, as well as this month and comparison with last year this month:
Source: Telangana civil supplies department
The pattern of consumption varies in every state and could be one of the main reasons that the rate of inflation varies between these states widely, according to Madhura Swaminathan, Professor and Head of Economic Analysis Unit, Indian Statistical Institute. She adds that since most commodities come under the ambit of GST, the possibility of differing taxes is eliminated. “A good public distribution system (PDS) in states like Tamil Nadu and Kerala has helped lower inflation rates. In Kerala, apart from the PDS shops, they also have several margin-free outlets which help provide civil supplies to the people at a cheaper price. In the case of Tamil Nadu, the state provides its people several products through its PDS system,” she says, conveying that it’s likely that people who reside in Kerala and Tamil Nadu spend less on basic necessities that form part of the bucket on the basis of which CPI is calculated.
Telangana rarely sees market intervention. Market intervention is when the government steps in to provide relief to the citizens. To cite an example, In 2020, when onion prices had hit the roof in Telangana, the state government bought onions from the open market and sold it to the public at subsidised prices. Initiatives like this help reduce the additional expense of people especially when prices of certain commodities shoot up. These kinds of market intervention initiatives are open to all but the people have to produce an ID proof to ensure it is not bought and resold in the market. During such initiatives people are restricted to purchasing only limited quantities.
“Both state governments and the Union government can do more to keep a check on the rising prices”, says Madhura Swaminathan.
Under the various schemes, Telangana State Civil Supplies Corporation Limited gives 6 kgs of rice per head, for Rs 1 per kg, without a limit on the number of members in a family to all pink ration card holders. Kerala meanwhile gives 2 kg boiled rice, Matta rice 2 kgs, raw rice 1 kg, wheat 1 kg and wheat flour 1 packet, for Rs 16 to pink ration card holders under the various schemes. Meanwhile Tamil Nadu provides rice, sugar, wheat, kerosene, toor dal, urad dal, palm oil and masoor dal under various schemes.
In Telangana, public transport is also expensive. To cite an example, from Central Bus Station to Secunderabad Railway station, a distance of 7.8 kms, a journey in an Express TSRTC bus- what would cost Rs 20 until two months ago is now Rs 35. This change in prices is because of three recent hikes in the prices and the introduction of a diesel cess. According to a Transport enthusiast who keenly monitors the public transport system in the state, it is easy to travel from mandal headquarters to district headquarters. But it is very difficult and expensive to travel the last mile to remote villages in Telangana.
“Improving public transportation and lowering the cost of transportation of commodities is one important step. When fuel prices increase, the effect of the rise is seen on several segments. Similarly, when prices of fertilisers increase, it affects agriculture and all its products. Governments can have a check on prices of commodities. They can do this by sending a coherent message to the traders and also by assuring people that the prices will not be allowed to rise further beyond a certain point,” Madhura said.
Discussing factors that could have probably led to the price rise, the economist said, “The price rise could be because of a rapid rise in demand of consumer products, or due to an external factor such as the ongoing war between Russia and Ukraine. In such cases price rise is driven by speculation and fear. Once the prices rise, it usually is not allowed to be reduced by the traders. The higher prices in the urban market could also be because of the post-COVID recovery. Fuel is also another important aspect to be considered. Food and fuel would contribute majorly to every family’s monthly expenses,” added the professor from the Indian Statistical Institute.
Telangana’s rural inflation was also the second highest in the country at 10.26%, with the most inflation seen in oils and fats, meat and fish, vegetables, and fruits among food. Fuel prices, too, continue to be high.
A report by Crisil said that rural poor were the worst hit, as food and fuel – which “occupy the largest share in the consumption basket of the poorest – saw highest inflation”.
“The first set of shocks to inflation have been broadly felt through food and fuel. Typically, poorer parts have a higher proportionate spending on food. About 60-80% of the total spending in states with less urban areas or lower incomes would be on food, fuel, health and education. At the margin, there could also have been logistics-related shocks,” Rahul Bajoria, Chief Economist, Barclays, told the Indian Express.
Dinakar Lanka, BJP leader who is also a chartered accountant by qualification alleges that the state government hasn’t done anything significant to provide a relief to citizens in terms of fuel prices. However, he added that the overall retail inflation was higher for April due to rise in the prices of imports keeping in view the Russia-Ukraine war and its consequent disruption in the supply chain across the globe.
“As far as states like Telangana are concerned, they have registered a higher rate of Inflation as the government hasn't considered the proposal to reduce the diesel and petrol taxes. In addition to this, higher Indirect expenses like godowns, malls and shop rents, transportation, loading, unloading and handling charges, etc, all have an effect on the price rise of commodities in Telangana,” he added.
“While people in the urban areas are managing, unfortunately, In Telangana’s rural areas people have been drastically impacted due to the abnormal raise in the prices. This is because there hasn’t been a proportional raise in the income of the people correspondingly to balance their payments,” added the BJP leader.
Defending the state government and hinting at a pan-India phenomenon, K Ramakrishna Rao, Special Chief Secretary, Finance department of Telangana told TNM that there isn’t any particular reason that can be attributed to the high inflation rate in the state. “There is a general rise in prices across the board, across the country, and Telangana is no exception to this. There is no specific reason attributable to a state or the state government’s action which has led to an increase in prices.”
(With inputs from Haripriya Suresh)