Retail Inflation

Retail Inflation

News: India’s retail inflation inched up to an eight-month high of 6.07% in February from 6.01% in January, with rural India experiencing a sharper price rise at 6.38%.

Details:
• When we generally talk about retail inflation, it often refers to the rate of inflation based on the consumer price index (CPI).The CPI tracks the change in retail prices of goods and services which households purchase for their daily consumption.The CPI monitors retail prices at a certain level for a particular commodity; price movement of goods and services at rural, urban and all-India levels.
• The change in the price index over a period of time is referred to as CPI-based inflation, or retail inflation.

What is 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.In India, there are four consumer price index numbers, which are calculated, and these are as follows:
o CPI for Industrial Workers (IW)
o CPI for Agricultural Labourers (AL)
o CPI for Rural Labourers (RL) and
o 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.The base year for CPI is 2012.
• To calculate CPI, multiply 100 to the fraction of the cost price of the current period and the base period.

Significance:
• 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 also helps understand the real value of salaries, wages, and pensions, the purchasing power of the nation’s currency, and regulating rates.CPI, one of the most important statistics to ascertain economic health, is generally based on the weighted average of the prices of commodities.
• It basically gives an idea of the cost of the standard of living.