Migration trends and economic shifts drive regional disparities in inflation and growth across India.
New Delhi, December 13: A recent report by the State Bank of India (SBI) highlights significant disparities in food inflation trends across Indian states, with middle- and high-income states experiencing sharper declines compared to low-income states.
The report emphasizes a marked downward shift in food inflation distribution in wealthier states over the past decade. “Middle and high-income states have shown a higher decline in food inflation in the last decade compared to low-income states, as reflected in the downward shift of distribution,” it stated.
One of the key factors driving this trend is labor migration. The report suggests that migration from low-income states to high-income states in search of better employment opportunities has accelerated disinflation in wealthier states. Conversely, low-income states have witnessed a more gradual decline in food inflation.
The findings also point to retail inflation across Indian states gradually converging toward the Reserve Bank of India’s (RBI) target of 4 percent. Using a Sigma-type methodology, the report observed a narrowing dispersion of inflation rates among states over the past decade.
“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,” the report noted.
Another significant insight is the shift in the share of Gross Fixed Capital Formation (GFCF) across income groups. Between FY15 and FY23, the share of low-income states in GFCF increased by 6.44 percent, while middle-income states remained stagnant at around 5 percent. High-income states, however, saw a dramatic rise in their GFCF share, soaring from 4.17 percent in FY15 to nearly 30 percent in FY23.
The report warns that this disparity in GFCF and migration trends could heighten inflationary pressures in high-income states, underscoring the need for balanced development strategies.
“These findings highlight the interconnected nature of migration, inflation, and economic growth across India, calling for comprehensive policy measures to address regional disparities,” the report concluded.