Inflation is a macroeconomic phenomenon which considers the aggregate prices of selected commodities of the country. It is measured in consumer price index, wholesale price index and GDP deflator. From 2009-10 the combined consumer price index has been calculated which takes into account the urban and rural prices of commodity basket. This new index gives one insight to inflation rate where urban and rural prices are compared. This paper is a case study of Amravati district where the prices of urban and rural areas of the district are examined.

Methodology:

The secondary data is collected from the official website of Directorate of Economics and Statistics, Mumbai¹. The commodities are selected on the basis of its utility in day to day life. There are twelve commodities. Both urban and rural prices of these commodities are tabulated from 2009-10 to 2013-14. The analysis is simply based on the graphical presentation and inflation rate. The inflation rate has derived from the percentage increase in the price over the years. The prices of commodities are the aggregate of quarterly prices of selected commodities.

The objective of the study is to examine price movements of the selected commodities over the years in urban and rural areas of Amravati district. It also tries to compare the price movements in urban and rural areas. The uniqueness of the paper is that it emphasizes the prices of selected commodities in urban and rural areas of Amravati district which are used as one of the information while calculating the national aggregate of inflation rate. On other way it is a micro observation of price rise at micro level.

Graphical representation of price movement:

1. Rice: the price of rice undergoes fluctuations throughout the years. It was ₹32.25/kg in 2009-10 which increased to ₹45.48/kg in 2013-14 in urban areas. Meanwhile it decreased by 7.5 per cent in 2010-11 and then sharply increased by 28.71 per cent in 2012-13 in urban areas. It decreased further by 18.37 per cent in 2013-14 in urban areas. If we compare the price of rice of urban areas with rural areas, we can observe that it has continuously increased in rural areas from `22.06/kg to ₹46.92/kg with the rate of 0.18 per cent, 15.29 per cent, 63.22 per cent and 12.88 per cent in the year 2010-11 to 2013-14 respectively. The rate of inflation is more in rural areas in the year 2012-13 as compare to urban areas.

Diagram No. 1 Comparison of prices of rice in urban and rural areas from 2009-10 to 2013-14.

2. Wheat: the price of wheat also underwent ups and down. Excluding the exception of year 2011-12 where price level decreased by 8.25 per cent in urban areas and 5.91 per cent in rural areas, all years observes continuous increase in the price of wheat. The rate of inflation is higher in rural areas than in urban areas.

Diagram No. 2 Comparison of prices of wheat in urban and rural areas from 2009-10 to 2013-14

3. Tur: The price of tur remained higher in rural areas than in urban areas except in the year 2013-14. However the price of tur has decreased over the years in both urban and rural areas. The sharp decline is observed in the year 2010-11. It declined by 8.84 per cent in urban areas and 11.01 per cent in rural areas.

Diagram No. 3 Comparison of prices of Tur dal in urban and rural area from 2009-10 to 2013-14

4. Potato: The rate of inflation for potato remained high in 2012-13 in the both urban and rural areas i.e. 66.17 per cent and 62.66 per cent respectively. The prices declined in two consecutive years; 2010-11 and 2011-12. Otherwise it has increased in 2012-13 and 2013-14. Here also the prices in rural areas are more than the prices in urban areas.

Diagram No. 4 Comparison of prices of potato in urban and rural areas from 2009-10 to 2013-14

4. Onion: the prices of onion inflated significantly in 2013-14 in both urban and rural areas. It increased by 119.71 per cent in urban areas and 138.32 per cent in rural areas. Excluding the year 2012-13 the price of onion in urban areas increased continuously whereas the rural areas price was low in 2011-12 and 2012-13. This commodity only observed higher price in urban areas than in rural areas.

Diagram No. 5 Comparison of prices of onion in urban and rural areas from 2009-10 to 2013-14

5. Edible Oil: the edible oil prices increased continuously till the year 2012-13. It decreased afterward by 12.11 per cent in urban areas and 3.99 per cent in rural areas. Though the rate of inflation is higher in urban areas. The actual prices are high in rural areas.

Diagram No. 6 Comparison of prices of edible oil in urban and rural area from 2009-10 to 2013-14.

6. Sugar: sugar is secondary product. The prices of sugar are influenced by the production of sugarcane. This commodity prices also underwent ups and down. It has increased by 13.97 per cent in 2012-13 in urban areas and 12 per cent in rural areas. However the prices of sugar are higher in rural areas than in urban areas.

Diagram No. 7 Comparison of prices of sugar in urban and rural areas from 2009-10 to 2013-14

7. Milk: the price of milk increased in 2011-12 by 18.32 per cent in urban areas whereas by 33.32 per cent in 2010-11 in rural areas. The price rise starts earlier in rural areas than in urban areas. At a glance it can easily be observed that the price of milk is higher in rural areas than in urban area.

Diagram No. 8 Comparison of prices of milk in urban and rural areas from 2009-10 to 2013-14.

8. Eggs: the price of eggs observed sudden increase in rural areas. It increased by 21.80 per cent in 2012-13 in urban areas and 92.55 per cent in rural areas. Urban areas underwent slow change from ₹34.11 /dozen in 2009-10 to ₹48.9/dozen in 2013-14. The diversion between the curves shows that rural prices swelled faster than urban prices.

Diagram No. 9 Comparison of prices of eggs in urban and rural areas from 2009-10 to 2013-14.

9. Chicken: the price of chicken observed fluctuations in urban areas. On the other hand it rose continuously in rural areas. It increased by 32.30 per cent in rural areas in 2010-11 from ₹83.33/kg to ₹110.25/kg. In urban areas it decreased by 37.40 per cent in 2010-11 and increased by 35 per cent in 2012-13.

Diagram No. 10 Comparison of prices of chicken in urban and rural areas from 2009-10 to 2013-14.

10. Petrol: the prices of petrol in rural areas are not available. In urban areas it increased continuously, excluding the year 2011-12, from ₹50.27/lit to ₹78.92/lit. The sharp rise in price is observed in 2012-13 by 29.46 per cent.

Diagram No. 11 Comparison of prices of petrol in urban and rural areas from 2009-10 to 2013-14.

Diagram No. 12 Comparison of prices of gas in urban areas from 2009-10 to 2013-14.

Table No. 1 Highest and lowest inflation rate in urban and rural area from 2010-11 to 2013-14.

HIGHEST INFLATION RATE

LOWEST INFLATION RATE

2010-11

2011-12

2012-13

2013-14

2010-11

2011-12

2012-13

2013-14

URBAN

Onion

(34.7%)

Milk

(18.3%)

Potato

(66.1%)

Onion

(119.7%)

Chicken

(37.4%)

Wheat

(8.35%)

Onion

(25.6%)

Oil

(12.1%)

RURAL

Milk

(33.3%)

Rice

(15.2%)

Eggs

(92.3%)

Onion

(138.3%)

Potato

(29.8%)

Onion

(31.2%)

Chicken

(4.6%)

Sugar

(7.3%)

11. Gas: the price of LPG gas also increased excluding the year 2011-12. It increased from ₹328 per cylinder to ₹466.18 per cylinder over the given period. Again the sharp increase is observed in 2012-13 by 23.07 per cent. The prices of gas in rural areas are not available.

OBSERVATIONS:

1. The table-1 shows the commodities with highest inflation rate and lowest inflation rate.

It can be observed that onion remained the most sensitive commodity in both urban and rural areas. The prices of onion are affected by supply side factors including hoarding.

2. The most important observation is that the prices of rural areas remained continuously higher than urban areas except wheat and onion.

3. The rate of inflation was high in urban areas for potatoes, oil, sugar and milk whereas rice, chicken and eggs observed high inflation rate in rural areas. Wheat, tur and chicken showed mixed behavior.

4. Two international commodities; petrol and gas are kept away from the calculation of rural prices. It may be a misleading factor as these commodities are widely used in rural areas. The negligence of these commodities in rural areas must have significant impact on the national aggregate.

5. The high protein commodities viz. milk, eggs and chicken observed higher inflation rate compare to other commodities especially in rural areas.

6. Three commodities provided by PDS viz. rice, wheat and tur shows different behavior. Prices of rice showed mixed trend like high in urban areas till 2012-13 and high in rural areas from 2012-13. Wheat enjoys high price in urban areas and tur enjoys high price in rural areas.

CONCLUSION:

It is generally considered that prices of commodities are always high in urban areas. This case study breaks this assumptions as it is observed that the most of selected commodities are costly in rural areas. So, it can be stated that the cost of fooding in rural areas is higher than in urban areas. Of course it cannot be denied that the cost of housing and other social infrastructure is high in urban areas as compared to rural areas.

REFERENCE:

1. www.mahades.maharashtra.gov.in

2. Socio economic review of Amravati district. From 2009-10 to 2013-14, Directorate of Economics and Statistics, New Mumbai.