Difference between urban & rural food inlfation

There seems to have been no supply shock at the all-India level which could explain such divergence in rural and urban food inflation. It would be another thing if there were to be a strike or blockade preventing movement of farm and dairy produce from villages to cities, which could have created a glut in rural parts and a scarcity in urban areas.

If supply can’t explain this, maybe the answer is in demand? Has rural demand come under a severe squeeze, as suggested by Parle-G’s makers? There is no definite answer in the absence of a detailed consumption expenditure survey to find out what has happened to consumption expenditure patterns. However, one set of statistics gives an idea about what has been happening in urban and rural food markets. Between July

2018 and July 2019, retail inflation for prepared meals, snacks and sweets etc, which would attract day-to-day retail food spending, increased by 18 basis points. One basis point is one hundredth of a percentage point. In rural areas, this number went down by 358 basis points (or 3.58 percentage points) during the same period. For cereals and products, of which biscuits are a part, urban inflation increased by 217 basis points during this period, while rural inflation went down by 328 basis points. This suggests that shopkeepers of Parle-G might indeed be having a difficult time finding buyers even though they were giving discounts.This is clearly not good news for the Indian economy.

(See Chart 4: Retail inflation for prepared meals, snacks and sweets etc.)