A new report from the State Bank of India (SBI) says that consumer prices in India will likely stay above 5% for the rest of 2024. Even though vegetable and protein prices went down a lot in November, food prices are still high because people in rural areas are still buying a lot of food.
The report points out that in rural areas, food is a big part of what people spend their money on. This means that food prices may stay high for a while. In October, the retail inflation rate was 6.21%, which is more than what the Reserve Bank of India (RBI) wants, which is 6%. This jump in inflation is mainly because of rising food prices, which have increased sharply over the past three months.
The report also mentions that around 40% of India’s inflation is influenced by imported goods. This makes it harder for the RBI to raise interest rates because it wants to keep inflation down. On top of that, government programs that give money directly to people have helped rural families buy more essential goods, as their income has improved.
However, even though the rural economy is strong, it can’t make up for the drop in spending in cities. Urban consumers are spending less because they no longer have the extra savings they built up during the pandemic.
In summary, the Indian economy is in a mixed situation. Rural areas are doing okay, which helps with inflation, but city spending is still lagging behind.
