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Inflation much more back-breaking in cities than villages: Study
People in cities, big or small, have suffered much more than those living in rural areas when it comes to dealing with the back-breaking retail inflation of items of daily use like cereals, pulses and vegetables, an analysis by the industry body Assocham has shown.

However, there are also a few items such as fruits and edible oil etc. which were rather more expensive for the people living in rural areas.

The analysis of the inflation data for the consumer price index for May showed that the price rise in cities was a whopping 21.29 per cent for the cereals and products year-on-year whereas inflation on this count was slightly less painful for those living in villages. The rural CPI increase of cereals and products was 14.74 per cent.

“The price rise of cereals and products was among the highest, possibly due to scanty monsoon last year. But this level of price increase really hurts the common people,” said Mr. D S Rawat, Secretary General Assocham.

Likewise, vegetables were selling in cities at a price which was significantly more than the villages. The inflation, measured by the consumer price index, for vegetables went up by a huge 14.52 per cent in May in the urban areas as compared to a less harsh level of 7.62 per cent in the rural areas.

Similarly, prices of eggs, fish and meat had gone up by 14.66 per cent in May in cities as compared to 11.46 per cent in the villages.

“In both the cases of vegetables and protein-based products such as egg, meat and fish, consumption itself is far less in the rural areas for two reasons: one, there is a less purchasing power in villages and secondly, the villagers are not as much of meat or egg-eaters as their peers in cities,” pointed out the Asocham paper.

However, there are also items where it is a reverse situation, and the people from rural areas have to pay much more than the city dwellers. For instance, the price rise, measured by CPI, was 7.61 per cent in May for oils and fats in villages, significantly higher than the cities where the inflation on this count was 1.34 per cent. The inflation was much higher in rural areas also for fruits and sugar.

Seeking to find reasons for a big deviation in prices in the rural and urban areas, the Assocham paper noted operational in-efficiencies in supply chain as one of the reasons for the phenomenon. On the other hand, the demand pattern based on the purchasing power differentials between the urban and rural areas is also a factor to reckon with.

“Anyhow, the consumption pattern in the villages can also come up to the level of cities, provided some of the urban infrastructure is reached there,” added the paper.

Mr. Rawat further said it is also a matter of concern that there is a huge gap between the inflation at the wholesale level and at the level of retail stores. “This calls for de-layering of the supply chains. It is a myth that de-layering will result in job losses. It would rather improve efficiencies which in turn will create more opportunities through increase in retail trade that itself will have a huge positive spin-off,” the paper said.

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