Inflation disparity explains South’s prosperity, subnational migration

Rupee billionaire MLAs. Cynics would explain this as an appalling display of power distance in a money-obsessed public life, but the South’s overwhelming representation in the HNI lawmakers’ club is as much a symbol of peninsular India’s broader prosperity as is the glaring regional disparity in staples-loaded retail inflation.

In economic terms, the two pieces of data indicate the South’s burgeoning wealth effect – across the spectrum. India’s consumer inflation gauge, with a disproportionate rural weighting of basic food items and a still substantial urban weighting, has fallen below the 4% legal mandate in February to a seven-month low.

However, a region-based analysis of inflation data indicates the South has averaged higher on the metric, presumably driven by demand, as those migrating from the less prosperous northern, eastern and central states seek toeholds in bustling economic hubs such as Coimbatore, Chennai, Bangalore, Hyderabad, Visakhapatnam, and Cochin.

“The region-wise index share CAGR growth during FY12 to FY25 (until Feb 2025) indicates that the southern region has the highest CAGR inflation of 6% in overall inflation,” SBI Research said in a study that analysed inflation across states and federally administered areas over the past 14 years.

Curiously, inflation in the South trended above the national average over the period in both rural and urban areas, indicating prosperity across the geographic spectrum – and possibly the impact of labour migration from the less economically advantaged states into even remote villages in the South – particularly the remittance-heavy Kerala.

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“Interestingly, the Southern region has the highest CAGR inflation in Rural (6.1%) and Urban (6%) areas, too,