Retail inflation, also known as Consumer Price Index (CPI) inflation, is the rate at which the prices of goods and services that consumers buy for personal use increase over time.
It measures the change in the cost of a basket of goods and services that are typically purchased by households, including food, clothing, housing, transportation, and medical care.
Four types of CPI are as follows:
CPI for Industrial Workers (IW).
CPI for Agricultural Labourer (AL).
CPI for Rural Labourer (RL).
CPI for Urban Non-Manual Employees (UNME).
Of these, the first three are compiled by the Labour Bureau in the Ministry of Labour and Employment.
Fourth is compiled by the NSO in the Ministry of Statistics and Programme Implementation.
Base Year for CPI is 2012.
In 2020, the Ministry of Labour and Employment released the new series of Consumer Price Index for Industrial Worker (CPI-IW) with base year 2016.
The Monetary Policy Committee (MPC) uses CPI data to control inflation. I
n April 2014, the RBI adopted the CPI as its key measure of inflation.
Retail inflation surged to 7.44% in July, up from 4.87% in June, marking the highest level since April 2022.
Food prices witnessed an 11.5% increase, contributing to the rise in inflation.
Vegetable prices, particularly tomatoes, jumped by 37.3%.
Cereals and pulses became over 13% more expensive.
Urban consumers faced a 12.3% increase in their food bill, while rural consumers encountered an 11% food inflation.
Overall inflation for rural residents stood at 7.63% in July.
The Consumer Price Index rose by 2.9% from June.
Food prices saw a 6.7% month-on-month increase.
The unexpected inflation print challenges the central bank's projection of an average 6.2% inflation for the July-September quarter.
Although tomato prices might ease inflation slightly in August, concerns remain about elevated prices of pulses, spices, milk, and cereals.
Speculations arise about the possibility of an interest rate hike due to sustained high inflation.
ICRA predicts the earliest possibility of lower interest rates in the second quarter of 2024-25, with a mild rate cut cycle.
Wholesale prices remained deflationary in July but food and primary article prices increased by over 7.5%, narrowing the overall price dip.
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