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● Significant differences in prices. Beneath the neat trends in
headline inflation numbers lie surprising variances in prices aross
the country. Given the socio-economic diversity of India, some
differences are expected. Price ratios vary 3–8x among cities for
commodities like milk and flour, which still manages to surprise.
● ‘Mix’ and infrastructure. Both drive price dispersion. For
products such as tea leaf where quality can vary, variance in
affordability drives the differences. For uniform quality products,
infrastructure bottlenecks restrain prices from equalizing.
● Key takeaways. (1) The market is integrated: Dispersion exists, but
price trends for products such as soaps and onion are surprisingly
uniform across regions; (2) The integration is far from seamless
likely due to poor infrastructure, making the economy inefficient and
fuelling inflation, while wheat now sells below MSP in the North
(overproduction), prices stay high in the south; (3) For items where
mix differs between cities, steady high dispersion shows that
relative affordability is not changing; (4) Tempting as it is, we advise
caution in using anecdotal evidence to assess inflation.
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