Retail inflation

  • Category
    Economy
  • Published
    20th Jul, 2020

Context

According to the latest data released by the Ministry of Statistics & Programme Implementation (MoSPI), India’s retail inflation grew 6.09 percent in June.

About

  • India’s retail inflation is measured by the Consumer Price Index (CPI). It grew at 6.09% in June.
  • The government had not released the headline retail inflation data in April and May.
    • However, in April, it had revised the CPI data for March to 5.84 percent from 5.91 percent.
  • The retail inflation has grown beyond the Reserve Bank of India’s (RBI) upper margin of 6 percent.
    • The government has mandated the Indian central bank to keep inflation within the range of 4 percent with a margin of 2 percent on either side.
  • The Consumer Food Price Index (CFPI) or the inflation in the food basket eased to 7.87 percent in June as the supply related issues because of the nationwide lockdown eased.
    • The CFPI for May was revised to 9.20 percent.
  • The retail inflation growth was due to:
    • A rise in pulses and productsprices that saw a 68 percent on-year rise in June.
    • The meat and fishsegment saw a rise of 22 percent.
    • Oils and fatsrose 27 percent and spices prices gained 11.74 percent.

Inflation

  • It is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.
  • Inflation is classified into three types: Demand-Pull inflation, Cost-Push inflation, and Built-In inflation.
  • The most commonly used inflation indexes are the Consumer Price Index (CPI) and the Wholesale Price Index (WPI).
  • In India, the NSO under the Ministry of Statistics and Programme Implementation (MOSPI) measures inflation.

    Consumer Price Index (CPI)

    • 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 CPI is used to calculate the inflation levels in an economy.
    • 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).
    • While the Ministry of Statistics and Program Implementation collects CPI (UNME) data and compiles it, the remaining three are collected by the Labour Bureau in the Ministry of Labour.
    • CPI = (Cost of basket divided by Cost of basket in the base year) multiplied by 100.
    • The base year for CPI is 2012.
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