Retail inflation at 5-year high of 7.3% in December

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News:The retail inflation based on Consumer Price Index(CPI) has reached a five and a half year high of 7.35% in December 2019.

Facts:

Reasons for rise in retail inflation:

  • The rise in retail inflation is primarily due to increase in Consumer food price inflation to 14.12% in December 2019.This is the highest since 17.89% in November 2013.
  • This rise in food inflation has been viewed as transitory driven largely by the damage to the kharif crop from prolonged unseasonal rains during September to early November,2019.
  • However,the simultaneous hardening of international prices poses a challenge to the government and the Reserve Bank of India in containing domestic food inflation at a time when the economy is already going through a deep slowdown.
  • Further,the latest overall retail inflation at 7.35% is also above the Reserve Bank of India‚Äôs upper band target of 6%.

Additional information:

About Consumer Price Index(CPI):

  • Consumer price index(CPI) is a statistic used to measure the average price of a basket of commonly used goods and services in a period relative to some base period.
  • It measures change in the price level of a market basket of consumer goods and services purchased by households.
  • It is widely used by countries as a macroeconomic indicator of inflation and deflation and as a tool by governments and central banks for inflation targeting and for monitoring price stability.
  • The CPI data is released monthly by the Central Statistics Office(CSO) which functions under the Ministry of Statistics and Programme Implementation.