Inflation bites small-city folk much harder

It’s big-city folk that are most often voluble about the rising cost of living. Remember the time in New Delhi when members from the opposition BJP trooped into the Assembly wearing vegetable garlands? But if data — consumer price index for industrial workers — is anything to go by, it’s people from the smaller cities who have borne the bigger brunt of rising prices. And it’s not the usual suspect — food inflation — that is always to blame. House rents too are responsible for squeezing wallets.

Consider 2013: while inflation across metros hovered around 9-13 per cent, some of the smaller cities saw prices spiral upwards by as much as 15-22 per cent between January and December last year.

Take, for instance, Durgapur in West Bengal, which saw prices shoot up 22 per cent in 2013.That was twice the levels experienced by Kolkata at 11 per cent. Similarly, Mysore saw prices shoot up by over 17 per cent while Bengaluru saw a more modest 13 per cent increase. Ditto for Delhi, which managed positively benign inflation at 9 per cent, while nearby Ghaziabad had to cope with 11 per cent.

Durgapur, Mundakayam (Kerala), Jharia (Jharkhand) and Mysore topped the list of high-inflation cities. So what happened? In some cases, it was transportation costs that played the villain. Take for instance Kerala which sources most of its food items from outside the state. With diesel prices moving up, shipping costs too headed northwards, pushing up food prices. In Durgapur, it was not

roti but the makaan that put citizens on the back foot. A breakdown of data shows that housing prices (rent) shot up by 50 per cent in the year to August 2013. It was the same story in Jharia where housing prices shot up by 82 per cent. In contrast, the metros experienced much more modest increases in rents, ranging from 2 to 14 per cent. In fact, except for Mumbai, rents overall rose by only 2-8 per cent.

Surprisingly, given that farms aren’t located in close proximity to big cities, food inflation was pretty much under check at 12-14 per cent. In the tier 2 cities, it appears as if rising affluence which is fuelling aspirational consumer spending, has been stoking inflation. It’s only services inflation that was a leveller across cities, with many experiencing similar inflation rates between September 2012 and August 2013.

So, have the metros always had it better when it comes to inflation? Yes, if we go by the past five years’ data. Even as the smaller cities vied with each other for the top spot in the inflation sweepstakes, the metros stayed put at lower levels.