Migration of labour from low-income states resulting in higher inflation in Kerala, TN: SBI study 

SBI research shows labor migration to high-income states drives inflation, with Southern states like Kerala and Tamil Nadu most affected.

The migration of labour from low-income states to high income states in search of employment opportunities is resulting in higher inflation in high income States in the South such as Kerala and Tamil Nadu, a research report by the State Bank of India (SBI) showed.

“The region wise analysis of retail prices shows that southern states display a higher trend in prices for items like vegetables, cereals and most of the pulses,” as per the paper.

“Northeast and Western regions have had lowest inflation against higher inflationary trends displayed by Southern and Eastern regions,” it said.

A back of the hand analysis indicated, in the Post-Pandemic period (FY21 to FY25), inflation declined by 3.4% in NE areas, while in Southern region it declined by 2.6% only, it said.

Primary trends suggest higher taxes levied on petrol/diesel, liquor, as also registration charges for automobiles and flats by the Southern states could be the driver of higher inflations, it pointed out.

Going by the share of sales tax collection by states, Southern states hold the highest share of 30%, followed by Northern region according to the paper. 

“Reading between the lines, we believe that migration of labour from low-income states to high income states in search of employment opportunities is resulting in higher inflation in high income states than lower income states as vouched by food inflation across cohort of high income / middle income and low-income states suggesting higher purchasing power anchors higher inflation,” India’s largest lender said in the report.