- Retail inflation is determined by the change in the prices of things related to the needs of the common people.
- Earlier this rate was 7.39% in July 2014, it was 3.15% in July 2019
- Inflation of vegetables was 26% in November, it increased to 61% in December
Retail inflation rose to 7.35% in December. This is the highest in five and a half years. Retail inflation reached the same levels as it was when the Modi government arrived. In July 2014, the rate was 7.39%. Last November was 5.54%. The statistics office released the figures on Monday.
Retail Inflation rose to 7.35% in December is the highest in five and a half years
The rise in prices of vegetables, especially onions, affected retail inflation more in December. Vegetables became 60.5% costlier in December. Food inflation rose to 14.12%. It was 10.01% in November.
Experts said – Hope to improve the situation in 2-3 months
- Economists say that if the right time is not taken care of, the country may go into stagflation. Stagflation called an increase in unemployment, a high inflation rate, and decreasing demand.
- Bank of Baroda Chief Economist Sameer Narang said – Retail inflation will come down to 6% in the next three months and 5% in the subsequent three months. Prices of vegetables have started falling. Food inflation expected to reach a comfortable level within two-three months. When the RBI reviews its annual monetary policy on 6 February, it will maintain the status quo on inflation.
- Crisil’s Chief Economist DK Joshi said – The common man will be the most affected by food inflation. However, it is a seasonal phenomenon and will subside in the next 2-3 months. If there is talk of reducing inflation, then one should not expect too much from the coming budget.
Reduced hopes of a reduction in repo rate due to increase in retail inflation
The RBI takes into account retail inflation while fixing interest rates in its review of monetary policy. RBI aims to keep retail inflation within the range of 4-6%. This is the first time since July 2016 that it has exceeded the RBI maximum target of over 6%. Banking sector expert RK Gautam says that with the retail inflation going above 6%, the scope of the central interest rate repo rate cut by the RBI will remain quite low. RBI will announce the interest rates after reviewing of the monetary policy on 6 February. The central bank reduced the repo rate by 1.35% last year.
How important are the retail inflation figures for the economy: 2 reasons
How affordable are the things related to catering: This rate shows that things related to common man’s catering are getting expensive or cheaper? Because food items account for around 50% of the retail inflation. Such as vegetables, fruits, paddy, meat, and fish.
Dearness Allowance: The central government determines the annual rate of dearness allowance (DA) based on the Consumer Price Index, which gives the retail inflation rate. 50 lakh employees and 62 lakh pensioners benefit from the increase in DA.
Retail Inflation Rate: 157 countries decide policies on this basis.
Inflation determined by a decrease or increase in prices of selected goods and services. Retail inflation is the rate that directly affects the public. The retail price index is the consumer price index. The index is based on the average payment consumers make for any goods or services. 157 countries decide policies based on the retail inflation rate. The retail inflation rate in India covers the changes in the prices of food and beverage items and services like education, communication, transportation, recycling, apparel, housing, and medical care. 448 goods and services in rural areas and 460 in urban areas are included in the Consumer Price Index. The second type of inflation called wholesale inflation. It decided on the basis of the wholesale price index. The prices of 697 commodities in this index vary based on fluctuations.
