India’s Retail Inflation Drops
Why in News?
India’s retail inflation fell to a seven-month low, as food prices—particularly vegetables, pulses, and eggs—eased.
- The retail inflation showed 3.6% in February 2025 as compared to 4.26% in January 2025.
Relevance:
GS-03 (Economy)
What is 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.
Key Highlights:
- Retail inflation of February 2025 marked the lowest inflation rate since July 2024. It dropped by 65 basis points to 3.6% in February 2025.
- Consumer Food Price Index (CFPI) rose 3.75% in February, down from 5.9% in January.
- Urban vs Rural Impact: Both urban and rural inflation dropped to 3.3% and 3.8% respectively.
- State-Wise Variation:
- Highest inflation in Kerala at 7.3%.
- Lowest inflation in Telangana at 1.3%.
- Nine states recorded inflation above 4% due to varying food price trends.
Significance:
- RBI alongside the government keeps a check on the inflation. However, RBI’s tries is to maintain inflation within 4%. This slowing inflation implies improved food supply and seasonal adjustments.
- It ensures increased household spending and also reduces the cost pressure on them.
Prelims Question:
Q. With reference to retail inflation, consider the following statements:
- Retail inflation measures the change in wholesale prices of goods and services.
- It is calculated using the Wholesale Price Index (WPI).
- It reflects the cost of living for households.
- Retail inflation is influenced mainly by industrial production levels.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 3 only
(c) 2 and 4 only
(d) 1, 3, and 4
Answer: (b) 3 only
Explanation:
- Retail inflation measures the changes in consumer prices and is calculated using the Consumer Price Index (CPI). Hence, statements 1 and 2 are incorrect.
- Retail inflation reflects the cost of living for households and is primarily influenced by food and fuel prices and not industrial production levels. Hence, statement 4 is also incorrect.
