Not just pulses, education, health costs soaring too in Modi’s era

Mumbai,Praveena Sharma: Past few months may have seen the consumer price index (CPI) or retail inflation ease, but the cost of living of India’s middle class has only been rising with prices of most items in its consumption basket like pulses, clothing, education, health services, meat, fish and others spiralling, says a paper brought out by the Indian industry body Assocham. “Inflation may have dropped significantly from last year, but middle class still finds high prices of goods and services consumed by it, growing beyond their comfort level,” said an Assocham study titled – Items of Middle Class Use Still Pinching Pockets. In September, CPI inflation eased to 4.41% compared to the 7.17% in the beginning of the year. It, however, rose marginally from August’s retail inflation number of 4.35%.


In its analysis of the CPI trend, the industry body points out that the middle class continued to reel under inflationary pressures as the most items it consumed were still rising above headline CPI numbers. For instance, prices of pulses, in which prices of tur dal has shot up to over Rs 200 per kilogram (kg), jumped 30%. The other item that saw spike above the headline CPI was spices at 9.2%. Even education and health services costs scaled up at a higher rate of 6% and 5.4% respectively in September than overall retail inflation.

According to D S Rawat, secretary general of Assocham, education and health services spends of the middle class were increasing as there were not enough government schools and hospitals in the country. “While the annual increase in prices of these services (education and health) may not show huge rise, the base price of such facilities is so high that it is becoming increasingly difficult for a large number of people in the cities and small towns to afford them.

Some of hospitals in Delhi charge as much as Rs 1 lakh a day,” Rawat said. He called for the public expenditure on health and education to be raised significantly at central as well as state government level to bring down their costs.

Ranen Banerjee, executive director, PwC India, also said most of the time inflationary pressure was usually felt by the lower middle class segment of the society. “Yes, it’s usually at the lower end (of the middle class) that the inflationary impact is felt the most,” he said. Banerjee, however, said that the consumption basket of the middle class was wide and a disproportionate rise in a few items in a certain month should not be taken as reflective of general trend. The industry chamber’s analysis also showed that prices of other middle class items like meat, fish, milk and milk products had also shot up over the CPI. As per its reading, EMI on retail lending also defied softening of retail inflation as they remained firm.

“While the Reserve Bank of India in the last instance reduced the policy rate by 50 basis points (one basis point is one-hundredth of a percentage), the average transmission is not above 30 basis points despite so much of prodding by the government and the RBI,” a statement issued by Assocham said. The cumulative drop in repo rate by the central bank since January stands at 1.25%. Banerjee said the slash in repo rate does not reflect in the EMIs of old borrowers as banks usually alter the loan tenure to adjust it to the new interest rate. “Lower interest rate would be reflected only in the EMIs of new loans,” he said.

Posted by on October 26, 2015. Filed under Editorial. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.