Inflation Retail – 19 month Low – January

Inflation Retail comes to a 19-month low.  The marginal drop in India in January 2019 as compared to December 2018 is largely due to the continuous decline in food prices, including vegetables and eggs.

Consumer Price Index (CPI) is  widely used as a macro-economic indicator of inflation, as a tool by governments and central banks.

It is used for targeting and for monitoring price stability, and as deflators in the national accounts.

What is Inflation?

It is defined as the increase of prices of goods and services over a particular  period of time.  Opposite of deflation, which describes a decrease of these prices. It is a significant economic indicator for a country.

The inflation rate is the rate at which the general rise in the level of prices, goods and services in any given economy occurs.  It is also how it affects the cost of living of those living in a particular country.


Decrease in prices

Inflation influences the interest rates paid on savings and mortgage rates but also has a bearing on levels of state pensions and benefits received.

Calculation of inflation rate :

It is calculated using the price increase of a defined product group. This product group contains products and services, on which the average consumer spends money one whole year.

These  include expenses for groceries, clothes, rent, power, telecommunications, recreational activities and raw materials (e.g. gas, oil), as well as taxes. 

Inflation has been decreasing slightly since 2010. India’s economy has been doing quite well, with its GDP increasing steadily for years.  The national debt is also decreasing.

Monetary policy committee :

In India rate of inflation is decide by monetary  policy committee.  This committee is formed by six members ( 3 member of government and 3 members of central bank).

The rate varies from 2–6 percentage of Indian GDP.

Lowest inflation rate :

Annual consumer inflation in India declined to 3.69 percent in August of 2018 from 4.17 percent in July and below market expectations of 3.86 percent. It reduced to 2.05% in January 2019. It is the lowest since October of 2017, mainly due to a sharp slowdown in food cost.

Food prices at the retail declined (-)2.17% in January from (-)2.15% in December.  This reflected the contracting vegetable and pulse prices.

Core inflation i.e., non-food, non-oil has been reduced by minutely to 5.4% from 5.6% in December. This remained much above the Central Bank’s forecast. Fuel inflation is at 2.2% compared to 4.5% in December. 

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