Retail Inflation Sees Significant Drop in April, Hits 4.7%

The latest data from the government shows that India’s retail inflation, which is measured by the consumer price index, dropped to 4.7% in April from 5.66% in the previous month. This was due to a decrease in food and fuel prices. It’s the lowest inflation rate seen in the last 18 months and falls within the acceptable range of 2-6% set by the Reserve Bank of India for the second consecutive month.

More News on the data released by the Government

• India’s retail inflation, as measured by the consumer price index, decreased to 4.7% in April 2023, which is the lowest in 18 months.
• This is due to lower food and fuel prices, with retail food inflation dropping to 3.84% in April from 4.79% in the previous month.
• However, retail inflation has remained above the Reserve Bank of India’s target of 4% for 43 consecutive months.
• The decline in inflation was sharper in urban areas compared to rural areas.
• In rural India, retail inflation decreased to 4.68% in April 2023 from 8.38% in the same month last year, while in urban areas, it decreased to 4.85% from 7.09%.
• The CPI is based on data collected from 1114 urban markets and 1181 villages covering all states and union territories.
• Core inflation, which excludes volatile food and fuel items, decreased to 5.2% in April from 5.8% in March.

What is Inflation?

Inflation refers to the increase in the general price level of goods and services in an economy over time, resulting in a decrease in the purchasing power of money.

What is Retail Inflation?

Retail inflation, also known as consumer price index (CPI) inflation, measures the average change in prices of a basket of goods and services consumed by households. It is calculated by comparing the prices of the basket of goods and services in a given period with the prices of the same basket in a base period.

What is Consumer Price Index (CPI)?

• Consumer Price Index (CPI) is a measure of the average change in prices of a basket of goods and services consumed by households.
• It is a widely used economic indicator that helps measure inflation and is often used as a gauge of changes in the cost of living.
• The CPI is calculated by taking the price of a representative sample of goods and services that are commonly consumed by households, such as food, housing, transportation, medical care, and recreation, among others.
• The prices of these items are collected from various retail outlets and service providers across different regions in the country.
• The CPI is measured separately for rural and urban areas of the country.
• The CPI is calculated and published by the National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI), on a monthly basis.
• The index is based on a fixed basket of goods and services that is updated every few years to reflect changes in consumption patterns.
• The base year for the current CPI series in India is 2012, with a base index value of 100.
• The CPI is an important tool for policymakers, as it helps them to assess the impact of changes in monetary and fiscal policy on inflation and the cost of living.
  • For example, if the CPI shows a rise in inflation, the central bank may increase interest rates to curb spending and reduce inflationary pressures.
  • Similarly, the government may take measures such as adjusting tax rates or subsidies to contain inflationary pressures.

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