“Poorest segment in urban areas faced highest inflation rate in July,” said the note, released days after official data said that the headline inflation accelerated to 7.44 per cent for July.
“The poorest segment in both urban and rural areas faced a higher inflation burden than their high-income counterparts, as food inflation accelerated sharply,” the Crisil note added.
Crisil said it used data from the National Sample Survey Organisation (NSSO) and mapped the expenditure baskets of three broad income groups – the bottom 20 per cent, middle 60 per cent and upper 20 per cent of the population – with July inflation.
The overall CPI inflation for the bottom 20 per cent income earners in urban areas came at 8.5 per cent in July against 7.9 per cent for their rural counterparts, the note said, adding that the same numbers had stood at 4.9 per cent and 4.7 per cent, respectively, in June.
As compared to this, the degree of change for the top 20 per cent income earners between July and June was more subdued, the note showed. The CPI for the top 20 per cent income earners in urban areas increased to 7.1 per cent in July from 5 per cent in June, while for the rural segment, it went up to 7.3 per cent from 4.9 per cent. The high-income segment in urban areas faced the lowest inflation burden, as food has a relatively low share in their consumption basket, the note said.
Within the poor people, the poorest segment in urban areas faced a higher burden than their rural counterparts as both food (12.3 per cent in urban against 11 per cent in rural) and fuel inflation (4.4 per cent versus 3.3 per cent) were higher in the former than the latter, the agency said.
Meanwhile, the rating agency also upped its FY24 overall CPI estimate to 5.5 per cent from the earlier 5 per cent following the release of the July data.
The extent of the sharp rise in July came as a surprise, it said, adding that early signs are pointing to a minimum relief in August.
“The higher-than-expected inflation reading and continued food price pressure, despite a softening core, put monetary policy in a dilemma,” the note said, admitting that typically the rate-setting panel overlooks supply-side shocks like the current one.
It expects the monetary policy committee to hold rates at its next meeting in October and cut rates only in the early part of next fiscal.