Why in the News?

India's retail inflation reached a nine-month high in September, driven by increased food prices. The annual inflation rate rose to 5.49%, up from 3.65% in August, marking the highest level since December 2023, when it was 5.69%.

Y-o-Y consumer price inflation trends from September 2023 to September 2024

About Inflation

• Definition: Inflation refers to the rate at which the prices of goods and services increase over time, reducing the purchasing power of money.
• Causes of Inflation
  • Demand-Pull Inflation: Demand Pull inflation occurs when the demand for goods and services exceeds their supply.
  • Cost-Push Inflation: Cost-push inflation is driven by an increase in the production costs for goods and services.
  • Price Power Inflation: When the price of goods and services has not been increased for a long period of time.

Indices to measure inflation in India

• Wholesale Price Index (WPI)
  • It measures the average change in the prices of goods at the wholesale level (from the perspective of producers and businesses).
  • Excludes: Services.
  • Commodities Covered
    • Primary Articles (117)
    • Fuel and Power (16)
    • Manufactured Products (564)
  • Base Year: 2011-12
  • Published by: Office of Economic Adviser, DPIIT, Ministry of Commerce and Industry
• Consumer Price Index (CPI)
  • It is a key indicator of inflation that measures changes in the average retail prices paid by consumers for a basket of goods and services over time.
  • Base Year: 2012
  • Published by: National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI)
  • Monetary Policy: Used by the Monetary Policy Committee (MPC) of the RBI to control inflation.
• In India, there are different CPIs that cater to specific population groups:
  • CPI for Industrial Workers (CPI-IW)
  • CPI for Agricultural Laborers (CPI-AL)
  • CPI for Rural Laborers (CPI-RL)
  • CPI for Combined (CPI-C)