Prices and inequalities in a developing economy: The case of India

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Abstract
This article examines the effects of relative price movements on the consumption expenditure distributions in rural and urban areas of India. The ‘true’ cost‐of‐living indices constructed for different expenditure classes have highlighted the uneven effects of price rises affecting the bottom classes more adversely than the top classes. While a declining trend is noticed in the relative inequality in nominal terms, real inequality does not decline. In turn, the inegalitarian bias due to relative price changes and the ‘strategic’ commodity groups causing such bias are identified. Cereals followed by other food items are traced to be the ‘strategic’ groups causing a regressive impact on the inequalities in both rural and urban areas.

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