Retail Inflation in India

Source– This post on Retail inflation in India has been created based on the article “2024 brings breather on inflation but food prices are still sticky” published in “The Hindu” on 12 February 2024.

Why in the news?

India’s retail inflation eased to a three-month low of 5.1% recently. Retail Inflation in India

About Retail Inflation

1)  Retail inflation is also known as Consumer Price Index (CPI) inflation. It tracks the change in retail prices of goods and services which households purchase for their daily consumption.
2) CPI is calculated for a fixed basket of goods and services that may or may not be altered by the government from time to time.
3) The change in the price index over a period of time is referred to as CPI-based inflation, or retail inflation.

Released by-The National Statistical Office (NSO) under Ministry of Statistics and Programme Implementation (MoSPI), compiles All India as well as state-wise CPI for Rural, Urban, Combined sectors. It releases the CPI numbers every month.

Importance of Retail Inflation for Health of Economy

1) It is widely considered as a barometer of inflation.
2) It is a tool for monitoring price stability
3) The Reserve Bank of India is now using CPI( Combined) as the benchmark for its monetary policy tools like Repo Rate, Reverse Repo Rate.
4) It interprets about the purchasing power of consumers.
5) It tells about cost of living.

Some Other Important Inflation Types

1) Headline inflation– It is a measure of the total inflation within an economy. It includes commodities such as food and energy prices. It is much more volatile and prone to inflationary spikes. The inflation rate expressed in Wholesale Price Index usually denotes the headline inflation.

2) Core inflation–  It refers to the change in the cost of goods and services excluding the food and energy sectors. These items are not included in estimate of inflation since their prices are unpredictable.

UPSC Syllabus-Indian economy.