CPI INFLATION
WHAT IS CPI INFLATION ?
- The CPI tracks the change in retail prices of goods and services which households purchase for their daily consumption.
- The CPI monitors retail prices at a certain level for a particular commodity; price movement of goods and services at rural, urban and all-India levels.
- The change in the price index over a period of time is referred to as CPI-based inflation, or retail inflation.
It is calculated by :
CPI formula: (Price of basket in current period / Price of basket in base period) x 10
KEY FACTORS THAT LEAD TO RECENT SPIKE IN CPI INFLATION
- Food and beverages, excluding vegetables, with a weight of over 54 percent in the CPI basket pushed the January CPI print to a three month high.
- Cereals were the main drivers of recent spikes in inflation.
- Items such as meat & fish, eggs, milk products, spices along with prepared meals, snacks, sweets, etc. also saw a price spike.
- Fruits recorded moderate inflation mainly on account of seasonal factors which also brought down the prices of vegetables.
- Inflation for footwear and fuel continues to be in double digits which also contributed to the headline inflation.
CAUSES OF INFLATION SURGE IN CEREALS
- Three factors are responsible for the higher prices of cereals:
- Soaring input prices.
- Unfavourable weather.
- Increased market uncertainties due to Ukraine war.
FACTORS THAT CAN CONTROL CEREALS INFLATION INCLUDES:
- Open market sales by the government.
- Higher acreage.
- Most important favourable climate in March-April.
SYLLABUS: PRELIMS, INDIAN ECONOMY
