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The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket and averaging them. Prices are collected periodically, and the CPI is often used to measure inflation, reflecting the cost of living. The CPI is typically set against a base year. The index is set to 100 in the base year, and changes in the CPI indicate price changes compared to that year. A typical household might purchase a wide range of products and services. Items in the basket are weighted according to their importance or share in total household spending.
The Inflation Rate is the percentage increase in the general level of prices for goods and services over a period of time. It indicates how much prices have risen over a specific period, typically a year. Higher inflation decreases the purchasing power of money, meaning consumers can buy less with the same amount of money.It reflects the overall health of an economy. Moderate inflation is expected in a growing economy, but hyperinflation can indicate economic instability. The Inflation Rate is calculated using the following formula: Inflation Rate (%) = ((CPI in Current Year−CPI in Previous Year)/ (CPI in Previous Year))×100
India’s CPI has shown a consistent upward trend over the decade, indicating a general increase in the cost of goods and services all across the country. Starting from around 119-120 in early 2014, the index has risen to about 185-186 by early 2024, representing a significant increase in prices over this period. Inflation rates have fluctuated considerably throughout the decade. In 2014, inflation was relatively high, often exceeding 6-8%. However, there was a noticeable decline in inflation rates from 2015 to 2017, most of the time remained below 5%. This period of relative price stability was followed by a slight uptick in 2018 and 2019 when inflation rates generally ranged between 2% and 4%. The years 2020 and 2021 saw more volatility in inflation rates, likely influenced by the global COVID-19 pandemic and its economic impacts. Inflation spiked in late 2020 and reached over 7% in some months before moderating somewhat in 2021. The years 2022 and 2023 witnessed another period of elevated inflation, with rates frequently exceeding 6% and sometimes approaching or surpassing 7%. In the early period of 2024, inflation appears to have moderated slightly but remains relatively high at around 5%. It’s worth noting that rural areas have generally experienced slightly higher inflation rates compared to urban areas, suggesting a potentially greater impact of price increases on rural populations. The data also reveals seasonal patterns in the CPI, with certain months consistently showing higher or lower index values. This could be related to factors such as agricultural cycles or seasonal demand patterns in the Indian economy. Overall, while India has experienced periods of both high and moderate inflation over the past decade, the general trend has been one of increasing prices, with the CPI nearly doubling over the ten-year period. Throughout this period, India’s monetary policy, economic planning, and consumer purchasing power have been significantly impacted by this ongoing inflationary environment.
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