State-wise inflation analysis: How being vegetarian affects your budget in India

When we hear the word ‘inflation,’ it often stirs up a lot of discussion and attention. Let’s break it down in simple terms:

Inflation: Inflation is the rate at which the prices of goods and services increase over time. When inflation is high, the purchasing power of money decreases, meaning that people can buy fewer goods and services with the same amount of money.

There’s a sense of calm among investors as inflation in India has eased, but there’s still a lingering concern in the air due to the rising food inflation. It’s important to note that food inflation is not considered in core inflation.

What is food inflation: Now, think about just the cookies in your jar. If a year ago, you could buy 10 cookies for Rs 100, but now you can only buy 8 cookies for Rs 100, that’s food inflation specifically. It’s when the prices of the food you eat, like cookies, bread, or milk, go up, and you need to spend more money to buy the same amount of food you used to. Food inflation is a part of overall inflation, which includes everything you spend money on, not just food.

In the fiscal year 2024, household expenses have consistently remained elevated in seven Indian states, including Rajasthan, Haryana, Telangana, Jharkhand, Uttarakhand, Tamil Nadu, and Uttar Pradesh. Notably, retail inflation in these regions has consistently outpaced the national average from April 2023 to August 2023.

As of August 2023, India’s overall retail inflation stood at 6.83%, with Rajasthan recording the highest rate at a significant 8.6%. Telangana and Haryana shared the second position with a Consumer Price Index (CPI) inflation rate of 8.27% each. It’s worth mentioning that even in July 2023, when the all-India CPI inflation was 7.44%, Rajasthan experienced an even higher rate of 9.66%.

In these seven states, retail inflation remains higher than the national average.

The recent surge in household expenses can be attributed to the inflation of key food items, particularly tomatoes and onions. In August, vegetables played a substantial role in driving inflation, with a staggering CPI inflation rate of 26.14%. Additionally, spices and pulses saw inflation rates of 23.19% and 13.04%, respectively. In July, tomatoes were among the most expensive food items for the average Indian household.

Upon closer examination, a common thread emerges in these states: some of the states with higher inflation also have a larger vegetarian population.

As per the findings of the National Family Health Survey 5, Rajasthan takes the lead with the highest percentage of vegetarians, with a population that has never consumed fish, chicken, or meat. Haryana and Uttar Pradesh closely follow suit in this regard. This suggests that vegetarian diets may be more vulnerable to price fluctuations in key food items such as vegetables, fruits, and spices. This is likely because vegetarians rely more on these items to meet their nutritional needs.

Strikingly, states known for their vegetable production, especially onions and tomatoes, have experienced lower inflation rates. For instance, Maharashtra, where 48% of India’s onions are grown, consistently reports inflation levels lower than the national average. This suggests that regional agricultural production may play a role in determining inflation patterns, as states with higher production of essential food items may be better insulated from price shocks.

Furthermore, data reveals that the per-capita income in three of the states with higher inflation rates—Telangana Rs 3,08,732, Tamil Nadu Rs 2,73,288, and Uttarakhand Rs 2,33,565—exceeds the national average. This higher purchasing power could be one of the factors contributing to the increased inflation in these states. This suggests that income levels may also play a role in influencing inflation patterns, as states with higher incomes may be more susceptible to demand-pull inflation.

In conclusion, the interplay between dietary preferences, regional agricultural production, and income levels significantly influences inflation patterns and household expenses in different Indian states. Understanding these dynamics is essential for policymakers and consumers alike as they navigate the challenges of managing household budgets amid fluctuating inflation rates.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet, and is subject to changes. Please consult an expert before making related decisions.