Fuel cess fires up retail inflation, Kerala now 4th highest in country
THIRUVANANTHAPURAM: In April, Kerala recorded the fourth-highest retail inflation rate in the country at 5.63%, coinciding with the introduction of the new fuel cess. Data released by the Union Ministry of Statistics last week revealed that the national average, based on data from 22 states, stood at 4.70%. Uttarakhand (6.04%), Telangana (6.02%), and Haryana (5.68%) reported higher inflation rates than Kerala. This marked a significant decline in Kerala’s performance in containing everyday prices, as it climbed from the 11th position in March to fourth in April. In February and January, the state ranked 13th and 11th, respectively.
Economist Jose Sebastian, a former faculty member of the Gulati Institute of Finance and Taxation, attributes the surge in inflation to the new fuel cess. “The prices of petrol and diesel went up by `2 a litre. But the cumulative effect on everyday prices would be disproportionately high.
The cost of anything and everything transported for business went up due to the increase,” he said. Sebastian points out that traders, aware of consumers’ increased purchasing power, passed on the additional costs, which would not have been the case during times of lower demand, such as during the pandemic. He highlights that food items, including vegetables and provisions, carry significant weightage in the Consumer Price Index (CPI).
In terms of the CPI, rural areas of Kerala experienced higher inflation with a figure of 186.4, while urban regions reported 184.3. The National Statistical Office (NSO) calculates the inflation rate based on six baskets or groups of goods and services: ‘food and beverages,’ ‘pan, tobacco and intoxicants,’ ‘clothing and footwear,’ ‘housing,’ ‘fuel and light,’ and ‘miscellaneous.’
In April, Kerala’s Consumer Price Index for the ‘fuel and light’ basket was 208.9, compared to the national figure of 181.7. For the ‘food and beverages’ basket, Kerala recorded an index of 187.1, while India’s figure was 178. In the ‘housing’ basket, Kerala’s CPI based on rental prices in urban areas was 184.1, surpassing the national figure of 175.2. Kerala’s CPI for the ‘pan, tobacco and intoxicants’ basket was 208.2, while the country’s figure was 200.6.
Since January, both the country and Kerala have shown a declining trend in the inflation rate. The national figure decreased from 6.52% in January to 4.70% in April, and for Kerala, it dropped from 6.45% to 5.63%. However, in January and February, both India and Kerala experienced inflation rates that breached the Reserve Bank of India’s tolerance band of 2-6%.
