Economists eye silver lining in India’s rising rural inflation numbers

• Nov 10, 2020

India's rural inflation rate surged faster than urban inflation for the first time in 19 months in January, and economists are optimistic that signals something the country desperately needs - a revival in demand in the rural economy.

Around two-thirds of India's population depends on the rural sector with agriculture accounting for near 15 per cent of India's $2.8 trillion economy, and rising inflation suggests pricing power is returning to the hands of the farmers, say economists.

"This augurs well for farmers' cash flows in the coming months. I expect early signs of demand revival to emerge from the rural belts, going ahead," said Rupa Rege Nitsure, chief economist at L&T Financial Holdings.

Rural inflation rose to 7.73 per cent in January, higher than the urban inflation rate - which was 7.39 per cent - for the first time since June 2018. The latest data, released on Wednesday, also showed that overall inflation was 7.59 per cent - its highest level in more than six years.