Retail inflation rate has come down to a 4-month low in December 2024. According to the released data, inflation has come down to 5.22%. Earlier in November, the inflation rate was at 5.48%. At the same time, 4 months ago in August, inflation was at 3.65%.
Key features of retail inflation
Food inflation
- The Consumer Food Price Index (CFPI) recorded a growth of 39% on an annual basis in December, down from 9% in November.
Deficit foods
- Vegetables: 6% (down from 29% in November).
- Pulses: 8%.
- Cereals: 51%.
Foods with price rise
- Meat: 3%.
- Eggs: 85%.
- Edible oil: 6%.
- Result: 5%.
Core Inflation: Excluding volatile components such as food and fuel, core inflation declined to 5% in December, indicating easing domestic demand pressure.Regional Variations: Inflation rate was recorded at 76% in rural areas, while the rate was relatively lower at 4.58% in urban areas.
Consumer Price Index
- The Consumer Price Index (CPI) is a statistical measure used to track changes in the average price level of goods and services consumed by households over time.
Importance
- Measures inflation.
- Provides information about the cost of living.
- Serves as an important economic indicator.
Calculation of Consumer Price Index (CPI)
- CPI is expressed as a percentage. • It compares the general price level of goods and services in the market in a particular time period with a base year of the past.
- Currently the base year is 2012.
- Formula for calculation: CPI = (Cost of fixed basket of goods and services in the current year / Cost of fixed basket of goods and services in the base year) × 100
Data Collection and Publication
- The National Statistical Office (NSO), which comes under the Ministry of Statistics and Programme Implementation (MoSPI), compiles the CPI for rural, urban and overall areas along with the whole of India.
- CPI figures are published every month.
How inflation rises and falls
- The rise and fall of inflation mainly depends on demand and supply:
Rise in inflation
- When people have more money, they buy more goods. More purchases increase the demand for goods. If the supply is not sufficient, then the prices rise as compared to the demand, which increases inflation.
Decrease in inflation
- If the demand is low and the supply is high, then inflation decreases because the prices remain stable due to the abundance of goods.