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India’s Retail Inflation

Context

India's retail inflation surged to 6.21% in October 2023, marking the highest level in 14 months. The inflation rate exceeded the Reserve Bank of India's target range of 2% to 6% for the first time since August 2023. This rise in inflation is being attributed primarily to sharp increases in food prices, especially vegetables and edible oils.

Key Findings

Overall Inflation Rate
- In October, India's retail inflation stood at 21%, up from 5.49%in September.
- This marked a significant jump from earlier months: 65% in Augustand 3.54% in July.
Food Prices Drive Inflation
- The inflation in food pricessurged to a 15-month high of 10.87% in October, compared to 24% in September.
- Food inflation was notably higher in urban areas (11.09%)compared to rural areas (10.69%).
Key Drivers of Food Inflation
- Vegetablessaw the steepest price rise, with inflation reaching 18%, up from 35.99% in September.
- Edible oilsalso saw a sharp increase in inflation, rising from 47% in September to 9.51% in October, largely due to a 27% rise in global prices caused by supply disruptions.
Causes of Food Price Hikes
- The surge in vegetable prices, particularly tomatoes and onions, was driven by unseasonal rainsand extended monsoons in certain parts of India.
- The global rise in edible oil prices is due to supply disruptions, affecting inflation in the oils and fats sector.

Fact Box: CPI-based Inflation or Retail Inflation

CPI-based inflation or retail inflation tracks changes in the retail prices of goods and services that households typically purchase for daily consumption. This measure reflects the cost of living for consumers.
- Inflation Calculation: Inflation is calculated as the percentage change in the CPI over a specific period, usually comparing the current price level with the price level from the same period in the previous year.
- Deflation: If prices decrease, it is called deflation (negative inflation).
Role of CPI in the Economy
- Macroeconomic Indicator: CPI is used as a key macroeconomic indicator to measure inflation and monitor price stability.
- Central Bank's Focus: The Reserve Bank of India (RBI) closely tracks CPI to maintain price stability and for inflation targeting.
- Economic Health: CPI also provides insights into the purchasing power of the national currency, the real value of wages, and salaries.
Formula for calculating CPI: (Price of basket in current period / Price of basket in base period) x 100

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GS Analyst: Daily Current Affairs

13th November 2024 (9 Topics)

Copy

India’s Retail Inflation

Key Findings

Fact Box: CPI-based Inflation or Retail Inflation

Still Have Questions?

GS Analyst: Daily Current Affairs

India’s Retail Inflation

Key Findings

Fact Box: CPI-based Inflation or Retail Inflation

Still Have Questions?

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