Impressive rise in rural incomes is fuelling food inflation as people's dietary habits are changing for the better and increasing consumption, RBI governor D Subbarao said on Saturday.
Subbarao said in Bangalore that poor segments of the population are seeing an increase in income, leading to shift in their dietary habits. People are shifting from cereals to protein and eating more of egg, meat, milk, vegetables, pulses and fruits and "that's causing food inflation".
"Now we have evidence. Over the last five years, rural wages have grown by 20% every year" which RBI governor termed as a "remarkable success story".
When the incomes of poor people rise, almost all of that goes for consumption, leading to demand pressures, he said, in an address on "India's macroeconomic challenges - Some Reserve Bank Perspectives" at a meeting, organised by the Federation of Karnataka Chambers of Commerce and Industry.