India’s Retail inflation dips marginally from 6.73% of July to 6.69% in August: Important facts

The data released by the government showed a slight downfall of CPI-based Retail inflation in India from 6.73% of July to 6.69% in August. Food inflation in August also degraded marginally to 9.05% from the previous 9.62%.

What is retail inflation?

Retail inflation is the increase in the price of goods which is sold at the retail market. The increase in inelastic goods, whose price change does not significantly impact the demand for that product causes retail inflation. In India, it is measured by the consumer price index. RBI uses the retail inflation data to take the policy decisions

What is the consumer price index?

Consumer Price Index calculates the change in the price of commodities and services i.e. foods, health care, education, electronics, etc from the buyer point of view. The classifications of CPI are CPI for Industrial Workers (CPI-IW); CPI for Agricultural Labourer (CPI-AL); CPI for Rural Labourer (CPI-RL) and CPI for Urban Non-Manual Employees (CPI-UNME). The CPI data is used by the Monetary Policy Committee to control inflation.

What are the impacts of Retail inflation?

  • Hikes or dips of retail inflation do not always give exact statistics. It is core inflation that gives the exact value.
  • It will return back to the comfort level when the vegetable prices cool down.
  • The higher price of farm products also ensures the economic revival of the rural population.
  • The common household faces the problem with inflation as their demand for other products shrinks.

Decision taken by the monetary policy committee

The monetary policy committee has mandated the central bank to maintain inflation at 4% until March 2021.