Data | Rice, wheat push up inflation, but Southern States keep prices low

Cereal inflation highest since 2014, West Bengal, Rajasthan and Uttar Pradesh cross the 15% mark

After decelerating for three consecutive months, India’s retail inflation accelerated to 7% in August 2022. A major factor behind this uptick was a reversal in retail food inflation which declined to 6.7% in July but went up again to 7.6% in August. In turn, the surge in food inflation was due to rising cereal prices which quickened to 9.5% in August — the highest since February 2014.

While overall food inflation was high, wide variations were observed across major States. Particularly, the Southern States bucked the trend and recorded very low levels of food inflation in August. Tamil Nadu, Andhra Pradesh, Kerala and Karnataka were at the bottom of the list when major States were compared for retail food inflation. The August food inflation in these four States was 5% or less. Food inflation was lower than the national average in Telangana (6%) too.

In contrast, the western States of Gujarat (11.5%) and Rajasthan (10.4%) were at the top of the list with retail food inflation of over 10% in August. The other States which had food inflation higher than the national average include West Bengal (10.3%), Uttar Pradesh (9.2%), Maharashtra, and Uttarakhand (8.5%).

Chart 1 shows India’s overall retail inflation and food and beverage retail inflation since 2019. The overall retail inflation, after accelerating to 7.79% in April 2022, softened for three consecutive months. But the trend reversed with retail inflation touching the 7% mark in August 2022. In the case of food and beverages retail inflation, after accelerating to 8.1% in April 2022 — the highest in 17 months — it softened for three consecutive months. But similar to retail inflation, here too the trend reversed in August.

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Chart 2 plots item-wise retail inflation in August 2022 for all food-related products on the vertical axis. The chart also plots the weight of those items in the inflation calculation on the horizontal axis. The retail inflation of rice and wheat/wheat flour — from sources other than PDS — which carries the most weightage among food-related items, accelerated to 6.9% and 15.7% respectively in August 2022. In August, rice inflation was the highest in over 20 months while wheat/wheat flour inflation was the highest since at least January 2015. In fact, wheat/wheat flour inflation has surged this financial year, with each month recording over 9% of retail inflation.

Due to rising local prices, the government imposed an export ban on broken rice on September 9 and mandated an export duty of 20% on various grades of rice. After the ban on wheat exports in mid-May, the demand for Indian wheat flour surged pushing up the local prices. So, in late August, India imposed restrictions on wheat flour too, to rein in the prices.