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- India’s benchmark inflation rate, measured by the Consumer Price Index (CPI), firmed up to 5.59% year-on-year in December 2021, data released by the Ministry of Statistics and Programme Implementation showed.
About
- With this, the CPI has remained within the RBI’s tolerance level for the sixth consecutive month.
- According to the Monetary Policy Committee’s official mandate, the rate-setting panel is supposed to keep inflation in a band of 2-6%, with the medium-term target being 4%.
CPI-based Inflation
- Retail prices of goods and services: When we talk about the rate of inflation, it often refers to the rate of inflation based on the consumer price index (CPI).
- The CPI tracks the change in retail prices of goods and services which households purchase for their daily consumption.
- To measure inflation: we estimate how much CPI has increased in terms of percentage change over the same period the previous year.
- If prices have fallen, it is known as deflation (negative inflation).
- The Central Bank (RBI) pays very close attention to this figure in its role of maintaining price stability in the economy.
- CPI also helps understand: the real value of salaries, wages, and pensions, the purchasing power of the nation’s currency, and regulating rates.
- CPI formula: (Price of basket in current period / Price of basket in base period) x 100
Difference between WPI and CPI
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Source: ET
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