KOCHI: Kerala’s deep love for coconut — and gold — is sending its inflation soaring, far above the national average — making it one of the most fascinating economic outliers in the country.
In September, Kerala’s inflation rate inched up to 9.05% from 9% in August — the highest among major states — while the national average cooled to 1.54% from 2.07% over the same month-on-month period.
According to SBI Research, the oil and fats component, particularly with the steep rise in coconut oil prices, is driving this trend, which has been exacerbated by local preferences and the climate-related impact on coconut production.
With gold prices rising to new highs, Kerala’s consumer price index (CPI) has been further fuelled by its higher weighting for personal care, which includes the yellow metal.
The numbers are stark: Gold inflation stands at 46.87% year-on-year, silver at 41.75%, while coconut oil prices have surged 108.70%. Coconut and copra inflation touched 73.67%.
Paras Jasrai, Associate Director, India Ratings and Research, told TNIE that gold prices have nearly doubled over the past year, and with the precious metal accounting for a major share in Kerala’s consumption basket, this surge has sharply pushed up inflation.
The “miscellaneous” category — covering gold and other services — recorded a steep 10.2% rise in the first half of FY26.
‘Kerala heavily reliant on other states for import of essential food items’
“While food inflation has dropped nationwide, Kerala’s food and beverages inflation stayed inflated at 8.5% over the same period, reflecting how local tastes and habits can shape a state’s economic story,” Paras said. “The surge in coconut oil prices has messed up the household budget of Keralites as it gets reflected in multiple ways. Coconut is treated as a fruit in the CPI basket, coconut oil comes under the oil and fats category and it again manifests in the prepared meals, snacks and sweets category when oil is used,” said Anoop S Kumar, assistant professor at Gulati Institute of Finance and Taxation (GIFT).
Similarly, gold and silver, which is categorised as miscellaneous items under personal care also have a higher weighting of 10.42% (rural) and 6.57% (urban) in Kerala, compared with 3.89% nationally, Anoop added.
“Unlike many other states, Kerala is structurally a consumer state, heavily dependent on imports of essential food items. The state’s agricultural base is relatively narrow, with rice, coconut, and certain spices dominating production, while cereals, pulses, vegetables, fruits, and even milk are sourced predominantly from outside. This structural reliance on inflows makes Kerala’s price dynamics particularly sensitive to supply chain shocks, climatic disruptions in producing states, and global commodity cycles,” P S Renjith, assistant professor at GIFT, pointed out.
Madhavankutty G, chief economist at Canara Bank, noted that Kerala is known for its “conspicuous consumption”, with a strong affinity for gold and silver, which contributes to rising inflation.
“Kerala’s agricultural land pool is shrinking, which forces it to depend heavily on neighbouring states even for goods like coconut, which it used to produce in plenty earlier. Naturally this pushes up costs for the end consumer. Finally it has one of the highest wage rates in the country which could lead to a wage-price spiral. We cannot also lose sight of the fact that it is a remittance-driven state which pushes up the general purchasing power of its populace. All these factors contribute to Kerala’s significantly higher inflation rate,” he added.
