India’s retail inflation drops to 4.31%
Context:
India’s retail inflation dropped to a five-month low of 4.31% in January 2024, driven by a decline in food inflation.
Relevance:
GS-03 (Economy)
Key Highlights:
- Retail inflation fell to 4.31% in January from 5.22% in December, while food inflation slowed for the third consecutive month to 6%.
- Inflation in urban areas dropped to 3.87%, below the RBI’s 4% target, while rural inflation stood at 4.64%, down from 5.8% in December.
- The RBI cut interest rates by 0.25%, anticipating inflation to ease further to 4.2% in 2025–26 while prioritising economic growth.
- Rupee depreciation may raise costs of imported goods like edible oils, fertilisers and petroleum, adding to inflationary pressures.
- Food Price Trends: Vegetable inflation fell to 11.3% from 26.6%, but prices of fruits (12.22%) and edible oils (15.6%) surged, with coconut oil (54.2%) and potatoes (49.6%) seeing the highest price rise.
Consumer Price Index (CPI)
- CPI inflation, also known as retail inflation, indicates the rate at which prices of goods and services that consumers purchase for personal use increase over time.
- It measures the change in the cost of a diverse array of goods and services commonly bought by households, which consists of food, clothing, housing, transportation, and medical care.
- The CPI comprises four categories:
- CPI for Industrial Workers (IW).
- CPI for Agricultural Labourer (AL).
- CPI for Rural Labourer (RL).
- CPI for Urban Non-Manual Employees (UNME).
- The first three are compiled by the Labour Bureau in the Ministry of Labour and Employment, while the fourth is compiled by the National Statistical Office (NSO) in the Ministry of Statistics and Programme Implementation.
