15 Nov Retail Inflation
Retail Inflation
Details on “Retail Inflation UPSC”
Relevance for Prelims: Inflation, CPI, WPI
Relevance for Mains: Need for Fixed Inflation Targeting (FIT)
Context: Retail Inflation has come down to 6.77% in October from 7.41% in September
Pic: Retail Inflation
About Retail Inflation:
- Retail Inflation is such a ‘witch’, which eats away the pleasure of a person.
- Retail Inflation refers to the rise in the price of goods and services of most goods and services of daily common use such as food, clothing, housing etcetera.
- An increase in inflation decreases the purchasing power of a unit of a country’s currency. It is measured by the National Statistical Organization which comes under the Ministry of Statistics and Programme Implementation.
- In the context of India, inflation is primarily measured by two indices,e., Consumer Price Index and the Whole Sale Price Index.
About CPI/Retail Inflation:
- Retail Inflation meaning calculates the differences in prices of commodities and services such as food and medical care which are generally consumed by Indian consumers.
- It measures inflation to reflect the perspective of a retail buyer.
- The inflation data is used by Monetary Policy Committee to control inflation by using quantitative and qualitative measures such as Changes in Repo Rate, Statutory Liquidity Ratio, and Open Market Operations.
Causes of Inflation In India:
- Food Inflation: Rise in prices of milk, cereals, and fruits due to an increase in input cost has decreased the purchasing power of money.
- Black Swan Events: COVID-19 and the Russia-Ukraine conflict have brought supply disruptions and weakness in Indian currency thus mounting inflationary pressures.
- Crude Oil: Less production due to a shortage of supply owing to the Russia-Ukraine conflict has increased the prices of crude oil (from $50 to $120).
Prohibition of unnecessary imports, minimizing dependence on oil, and recovery in demand will foster India’s growth. Managing applies of cash in the market and appropriate use of the RBI arsenal is the way forward.
UPSC Previous Year Question Prelims 2020
Consider the following statements:
1. The weightage of food in the Consumer Price Index (CPI) is higher than that in the Wholesale Price Index (WPI).
2. The WPI does not capture changes in the prices of services, which CPI does.
3. The Reserve Bank of India has now adopted WPI as its key measure of inflation and to decide on changing the key policy rates.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 only
(c) 3 only
(d) 1, 2 and 3
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