Inflation and high volatility hit the poor harder in India

There are two kinds of inequality that exist among the poor and the rich with respect to inflation. First, inflation erodes the purchasing power of the poor more than the rich and second, the rate of inflation faced by the poor is different than the rich. While the first kind of inequality has received a lot of attention in the literature, there have been only a few empirical studies which calculated the inequality in the rate of inflation among the rich and the poor.

This paper is the first attempt to track the inflation rates of the distribution of Indian households based on consumption weights of different fractiles of rural and urban households from 2015 to 2024. Rohan Bansal and Prachi Bansal computed the consumption expenditure shares of different fractiles of Indian households – from the poorest to the richest – and the inflation faced by them.

KEY FINDINGS

• The volatility of inflation is higher for the poor vis-à-vis the rich households and has persistently remained higher for the poor households.
• Inequality of inflation and high volatility is anti-poor and requires immediate policy intervention.

AUTHORS

• Prachi Bansal, Jindal School of Government and Public Policy, O.P. Jindal Global University
• Rohan Bansal, Reserve Bank of India, Mumbai

MEDIA CONTACT

• press[at]wid.world