The urban poor have been the worst-hit by the high inflation that has prevailed over the past one-and-a-half years, and the persistent uptick in fuel prices continues to pose a major threat for them, rating agency Crisil said in a note on Friday.
While inflation shrinks purchasing power across the board, the impact on different income classes varies with their share of spending on different commodity groups, Crisil economists D.K. Joshi and Pankhuri Tandon pointed out. They segregated the population into three groups by spending, and mapped inflation in commodities they consume.
They found that the experience of inflation was similar across income groups in rural India, but the urban poor faced a double whammy last year as well as in the first half of this year.
In FY21, the bottom 20% income earners in urban India experienced 7% inflation, while it was 6.4% for the top 20% and 6.8% for the rest. In the first half of FY22, this difference has narrowed but urban poor experienced inflation of 5.6%, while it was 5.4% for the top 20%.
Cereals, fuel and vegetables are the top commodities for the poorest 20% in both rural and urban areas; inflation remains above 6% in six of 10 commodities used by the rural poor and five by the urban poor. The economists said the share of fuel in total consumption is more for the poor. “The poor, urban more than rural, have likely [seen] inflationary pressures this fiscal primarily through fuel,” they added.
“Food inflation fell significantly from ~5% at the start of this fiscal to 0.7% in September. Fuel inflation rose from 8% to 13.6%. And core inflation remained sticky near 6%,” the note said, adding that the burden of these divergences also varied by income groups.