Know about Retail Inflation

ECONOMICS

Retail inflation indicates the increase in prices of a basket of goods and services such as energy, food, gasoline (petrol), housing, household goods, traveling fare, etc. compared to a base price. The inflation experienced by consumers at the retail shops is the exact reflection of the price rise in the country.

The index, which shows the inflation rate at the retail level is known as the Consumer Price Index (CPI). CPI measure changes over time in the general level of prices of goods and services that households acquire for the purpose of consumption. CPI numbers are widely used as a macroeconomic indicator of inflation, as a tool by governments and central banks for inflation targeting and for monitoring price stability, and as Deflators in the national accounts. CPI is also used for indexing dearness allowance to employees to increase in prices. CPI is therefore considered as one of the most important economic indicators. For construction of CPI numbers, two requisite components are weighted diagrams (consumption patterns) and price data collected at regular intervals. The data refer to group wise all India Consumer Price Index for Rural & Urban with base year 2010. The dataset is published by the Central Statistical Office and released on the 12th of every month.   

Monthly price data are collected from 1114 markets in 310 selected towns by the field operations division of NSSO and the specified state/UT directorates of Economics and Statistics and from 1181 selected villages by the department of posts. The prices are collected through web portals which are developed by National Informatics Center (NIC) for rural prices and for urban prices by the computer center in the Ministry of Statistics and Program Implementation (MOSPI).

How CPI is calculated?
The inflation rate is computed by subtracting the CPI of last year’s prices from the CPI value for this year, dividing that difference by last year’s CPI value and then multiplying by 100.
Example: If the value of the price index for the current year is 165, and last year’s value was 150, the rate would be calculated as:

Inflation rate = (165 – 150) X100= 10
                                  150

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