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CPI INFLATION

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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 released by the National statistical office, Ministry of Statistics and Program Implementation.
  • The base year for the index is 2012.

It is calculated by :

  • CPI formula: (Price of basket in current period / Price of basket in base period) x 100

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

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