India's Inflation Dynamics: State Disparities and Future Trends

India's inflation rate fell to a low of 3.6% in February, with significant state disparities. Kerala showed the highest inflation at 7.3%. Rural areas face steeper price hikes due to food costs. Future forecasts predict continued moderation, potentially prompting rate cuts to support consumers.

India's inflation rate recorded a notable decline to 3.6% in February, yet state-wise disparities remain stark. Kerala reported the highest inflation among states at 7.3%, according to a State Bank of India research report, while Chhattisgarh followed with 4.9%.

Rural inflation is surging more sharply compared to urban areas, mainly due to the significant contribution of food prices to the Consumer Price Index (CPI). Food items account for 54.2% of the rural consumption basket, against 36.3% in urban settings. Nine states reported rural inflation above the national average, whereas eight states experienced urban inflation exceeding the all-India rate.

Historically, Tamil Nadu has often recorded higher inflation than the national rate, while Gujarat and Punjab have typically maintained lower rates. Despite the overall cooling of inflation, disparities continue. A region-wise examination from FY12 to February 2025 highlights the Southern region's leading inflation rate. CPI inflation is expected to reach 3.9% in Q4 FY25, with potential for further moderation in FY26. Anticipation of this trend may result in a cumulative rate cut of 75 basis points over the year, beginning in April 2025.

(With inputs from agencies.)