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15th April 2022 (6 Topics)

India’s Inflation rate at 17-month high

Context

Recently released Consumer Price Index (CPI) inflation was at a 17-month high of 6.95% leading to growing concern over household consumption, saving and overall growth.

About

CPI Inflation

  • It is an index that tracks changes in the costs of the majority of commonly used products and services by consumers in order to measure retail inflation in the economy.
  • Retail inflation, or CPI-based inflation, is the term used to describe changes in the price index over time.
  • Generally speaking, the government and central bank utilize the CPI as a tool for price stability inspection and inflation targeting, as well as a deflator for the national accounts.
  • CPI Calculation formula: CPI = (Cost of basket divided by Cost of basket in the base year) multiplied by 100.
    • Base Year: 2012 is the CPI's base year.
  • Published by: The CPI-based inflation data is compiled by the Ministry of Statistics and Programme Implementation (or MoSPI).
  • CPI data is used by Monetary Policy Committee (MPC)to control inflation.
  • Reserve Bank of India (RBI) adopted the CPI as its key measure of inflation in April 2014.

Consumer price index numbers in India

  • In India, there are four consumer price index numbers, which are calculated, and these are as follows:
    • CPI for Industrial Workers (IW)
    • CPI for Agricultural Labourers (AL)
    • CPI for Rural Labourers (RL) and
    • CPI for Urban Non-Manual Employees (UNME)
  • The Labour Bureau under the Ministry of Labour gathers the remaining three, while the Ministry of Statistics and Program Implementation gathers and produces CPI (UNME) statistics.

Responsible factor

  • Price rise and inflation rates during the Covid-19 pandemic
  • Ongoing Russia-Ukraine war has complicated the situation as several countries across the world are facing worsening supply bottlenecks.

Situation in other nations

  • India is not the only country that has been witnessing rising inflation.
  • Developed nations such as the US, the UK, and China are also grappling with spiraling commodity prices.
  • While India's neighbors Pakistan and Sri Lanka are encountering the worst economic crisis, South Korea is also facing the issue of inflation.
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