business

Retail inflation at the lowest level in two years

The retail inflation rate in the country has come down to 4.25% in May. This is the lowest level of inflation in 25 months. Inflation in April 2021 was 4.23%. This decrease in inflation is due to the fall in the prices of food items. Earlier in April 2023, the retail inflation rate was 4.70%.

Rural inflation has come down from 4.68% to 4.17%. The urban inflation rate has come down from 4.85% to 4.27%. Food articles account for about half of the Consumer Price Index (CPI) basket. Food inflation has come down to 2.91% in May. It was 3.84% in April 2023 and 4.79% in March.

Fall in Inflation is a good sign for the economy

Regarding the fall in inflation, experts say that this is a good sign for the economy. Improvement in supply chain and relief in commodity prices have also benefited. However, while giving information about the monetary policy meeting held this month, the RBI governor had said that the concern and uncertainty about inflation still persists.

What is CPI?

As a consumer, we buy goods from the retail market. The Consumer Price Index i.e. CPI does the work of showing the changes in the prices related to it. CPI measures the average price we pay for goods and services.

Apart from crude oil, commodity prices, manufactured cost, there are many other factors which play an important role in determining the retail inflation rate. There are about 300 items on the basis of whose prices the rate of retail inflation is fixed.

How does inflation affect?

Inflation is directly related to purchasing power. For example, if the inflation rate is 8%, then Rs 100 earned will be worth only Rs 92. That’s why investing should be done to counter inflation. Otherwise the value of your money will decrease.

How does RBI control inflation?

To reduce inflation, the flow of money (liquidity) in the market is reduced. For this, the Reserve Bank of India (RBI) increases the repo rate. Like RBI had decided not to increase the repo rate in April and June. Earlier, RBI had increased the repo rate 6 times in a row. RBI had also cut the inflation forecast.

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