RETAIL INFLATION (Syllabus: GS Paper 3 – Economy)

Context: Recently, India witnessed a decline in retail inflation, as the inflation rate dropped to a four-month low of 4.87% in October, down from just over 5% in September, demonstrating a notable moderation in the rise of vegetable prices to 2.7% from 3.4%.

Inflation

• About: Inflation happens when the cost of things goes up in an economy, which makes it harder for people to buy stuff and reduces the value of the money they have.
• Measured By: Ministry of Statistics and Programme Implementation.
• Inflation tracks how the prices of a collection of goods and services change on average as time passes.
• Two main sets of inflation indices: The Wholesale Price Index (WPI) and the Consumer Price Index (CPI).
• Rural, Urban Inflation: Inflation faced by rural consumers eased from 5.33% in September to 5.1%, but urban households saw a fractional increase in inflation at 4.65%.

Retail Inflation

• About: It is also known as Consumer Price Index (CPI) inflation, which is the speed at which prices of items people purchase for their personal needs go up over a period.

o It checks how much the cost changes for a set of items that families usually get, like food, clothes, homes, transport, and medical help.

• Also known as: Consumer Price Index (CPI) in India and the Monetary Policy Committee (MPC) uses CPI data to control inflation.