Retail Inflation

Retail Inflation

Subject: Economy

Context: Retail inflation cooled slightly to 5.6% in July, slipping below the central bank’s upper tolerance threshold of 6% for the first time in three months, even as industrial output growth halved from 28.6% in May to 13.6% in June, as base effects from the national lockdown of 2020 begin to fade.

Concept:

Food prices at the consumer level played a substantive role in moderating the pace of price rise in July, with the National Statistical Office (NSO) estimating an inflation of 3.96%, compared to 5.15% in June

Retail Inflation

• The change in the consumer price index over a period of time is referred to as CPI-based inflation, or retail inflation.
• The CPI 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 calculated for a fixed list of items including food, housing, apparel, transportation, electronics, medical care, education, etc.
• The CPI specifically identifies periods of deflation or inflation for consumers in their day-to-day living expenses.

The CPI is used as a:

• Macroeconomic indicator of inflation;
• Tool by the central bank and government for inflation targeting and for inspecting price stability; and
• Deflator in the national accounts.

Consumer Price Index 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 Ministry of Statistics and Program Implementation collects CPI (UNME) data and compiles it but the remaining three are collected by the Labour Bureau in the Ministry of Labour.