India’s rural inflation rate surged quicker than urban inflation for the first time in 19 months in January, and economists are hopeful that signals something the nation frantically needs – a revival in demand within the provincial economy. According to economists, “Around two-thirds of India’s populace depends on the provincial segment with horticulture accounting for close 15% of India’s $2.8 trillion economy, and rising inflation proposes estimating control is returning to the hands of the agriculturists.”

Rupa Rege Nitsure, Chief economist at L&T Financial Holdings said, “This augurs well for farmers’ cash flows in the coming months. I expect early signs of demand revival to emerge from the rural belts, going ahead.” Rural inflation rose to 7.73% in January, higher than the urban inflation rate – which was 7.39%, for the first time since June 2018. According to the recent reports, the overall inflation was 7.59% – its most noteworthy level in more than six years.

India’s development has likely drooped to 11-year lows has fanned around stagflation. Economists say that the inflation numbers might signal momentum to rural growth. The central bank is commanded to keep the retail expansion rate between 2-6% and it targets a medium-term swelling rate of 4%. Rural inflation has been falling over the last year and half as lack of proper infrastructure for capacity and transport had cleared out provincial India with grains and the surges in a few states in 2019 made things more awful for product transportation. Radhika Rao, economist with DBS Bank added that better returns on food costs make strides the unfavourable terms of trade by the provincial sector.

This seems to bring great news for the government, which has been attempting to restore growth and boost consumption. In its budget this month, the government apportioned 5.6% higher spends on horticulture and allied activities for the fiscal year 2020-21. Whereas higher rural inflation seems to kickstart economic growth, economists caution that revival of urban demand revival remains a concern.

Credits: Reuters