India’s Inflation rate at 17-month high

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.

CPI Inflation

• It is an index measuring retail inflation in the economy by collecting the change in prices of most common goods and services used by consumers.
• The change in the price index over a period of time is referred to as CPI-based inflation, or retail inflation.
• Generally, CPI is used as a macroeconomic indicator of inflation, as a tool by the central bank and government for inflation targeting and for inspecting price stability, and as deflator in the national accounts.
• CPI Calculation formula: CPI = (Cost of basket divided by Cost of basket in the base year) multiplied by 100.
  • Base Year: The base year for CPI is 2012.
• 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) had adopted the CPI as its key measure of inflation in April 2014.

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 countrythat has been witnessing rising inflation.
• Developed nations such as the US, the UK, and China are also grappling with spiralling commodity prices.
• While India's neighbours Pakistan and Sri Lanka are encountering the worst economic crisis, South Korea is also facing the issue of inflation.