Is the Indian villager really spending way more on medicine than food?


  • India’s retail inflation hit an 18-month low.
  • Huge jump seen in health and education costs despite rural economy slowing down.
  • Economist questions the discrepancy in the latest data.
India’s retail inflation data hit an 18-month low, according to latest official data. That combined with the slump in industrial output is likely to trigger hopes of a change in the policy of the Reserve Bank of India that would likely prop up the country’s financial markets.

However, there is a devil in the detail that is more confusing than convincing.

At a time when rural consumption is on a downtrend and farmer incomes are declining, there was a huge jump in health and education.

Food prices fell 2.5% in December while the cost of health rose 9% and the cost of education jumped 8.4%. “That defies all logical explanations,” said Soumya Kanti Ghosh, the group chief economic advisor at State Bank of India (SBI).

InflationDecember 2018
Health9%
Education8.40%
Food2.50%


While the rollout of the government-subsidized healthcare program may have led more people to access health services, “the jump in healthcare costs is happening mostly because of jump in medicine costs from non-institutional sources, that begs explanation,” Ghosh added.

The fact that India’s rural economy is slowing down is evident from many key economic indicators recently, including two-wheeler sales, fuel consumption data as well as sales of commercial vehicles.

The recent data also shows that the Indian farmer has consistently been getting less and less for his crop.

Separately, the benefit of the falling costs of food and vegetables has not reached the end consumer. And with little difference to disposable income, it is less likely that the person would consume more -- much less on health and education.


SEE MORE:
India’s retail inflation rate just hit its lowest point since June 2017, raising the prospects of a rate cut and more handouts to farmers

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