Labour migration to high-income southern states is driving up inflation there.
Southern states show higher retail prices for vegetables, cereals, and pulses.
Inflation decline post-pandemic (FY21-FY25) was 2.6% in the South, compared to 3.4% in the Northeast.
Higher state taxes on petrol/diesel, liquor, and automobile registrations in the South are a contributing factor.
Southern states hold the highest share of sales tax collection at 30%.
Increased purchasing power due to labour migration is linked to higher food inflation in high-income states.
Kerala recorded the highest state inflation rate in February at 7.3%.
India’s CPI inflation moderated to a 7-month low of 3.6% in February.
Nine major states have rural inflation above the national rural average.
Eight states have urban inflation above the national urban average.
SBI predicts CPI inflation may slow to 3.9% in Q4 FY25 and average 4.7% in FY25.
SBI expects FY26 inflation between 4.0-4.2% and core inflation between 4.2-4.4%.
SBI anticipates at least 75 basis points of cumulative rate cuts.
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