Rising prices of dung cakes, firewood spike rural inflation: CRISIL

A rising divide has been noticed between rural and urban inflation which is primarily caused by surging prices of dung cakes, firewood and chips.

The gap between urban and rural inflation has remained near 100 basis points in the recent past, caused by higher core and fuel inflation in the rural areas, a CRISIL report stated.

The CPI numbers for June 2016 revealed by the Ministry of Statistics showed that rural inflation stood at 6.20% while urban stood at 5.26%.

Inflation by rising dung cake prices was up 10.8% while that of firewood and chips was up 7.4%, the report added.

CRISIL pointed out why rural areas are facing higher inflationary pressures by breaking down the data provided in National Sample Survey Organisation’s household consumption expenditure data for 2011-12.

Almost 84% of the rural population uses firewood as compared to 23% urbanites and approximately 41% rural people use dung cakes as compared to only 7% in urban centres.

Image Source: CRISIL Report

A report by Times of India stated that at a time when low oil prices have brought big relief to urban households, rural India is hit by an unprecedented rise in cooking fuel prices.

Petrol prices fell 7.6% last fiscal, and diesel prices 11.7% which hasn’t benefited rural areas as much as urban, the CRISIL report stated.

Urban regions have long benefited from lower global prices.

In yet another story on higher rural inflation, Zee Business spoke to Choice Broking analyst, Satish Kumar who stated that use of dung cakes and firewood by people in rural areas are costlier as they are not part of the global deflation cycle.

In addition, poor storage and transport facilities (poor roads and connectivity) have meant limited pass-through of lower commodity prices to the countryside, the CRISIL report stated.

This, in turn, feeds into food and non-food inflation.

Lack of recreation options and supporting infrastructure such as constant electricity also stoke inflation in rural areas, the report added.