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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
At the end of FY 2023-24, the overall inflation rate (Combined General Index) at the national level was 3.54%, with an index value of 192.9, indicating moderate inflation within the Reserve Bank of India’s target range. However, there were significant variations across different sectors and commodity groups. The food and beverages sector, which heavily impacts the common person’s budget, showed concerning trends. Pulses and products recorded the highest inflation rate at 14.77% (index: 213.7), potentially due to supply constraints and weather-related factors, closely followed by Cereals and products with 8.14% inflation, suggesting pressure on staple food prices. The vegetable category showed substantial inflation at 6.83% with a high index of 267.3, while meat, fish, and eggs also demonstrated significant inflation rates of 5.97% and 6.76%, respectively. Interestingly, some food categories reported deflationary trends. Oils and fats registered -1.17% inflation and spices showed -1.43%, providing some relief to consumers. The fuel and light category observed the most notable deflationary trend, with a -5.48% inflation rate, which could be attributed to global energy price dynamics and government policies.
In the non-food categories, personal care and effects showed relatively high inflation at 8.44%, while housing remained moderate at 2.68%. The clothing and footwear sector demonstrated controlled inflation at 2.67%, suggesting stable prices in this segment. Education and health services showed moderate inflation rates of 3.43% and 4.06%, respectively, indicating steady increases in service costs. The miscellaneous category, which includes various essential services, recorded an inflation rate of 3.79%, with significant variations among its sub-components. Transport and communication services maintained relatively low inflation at 2.48%, while recreation and amusement services showed the lowest inflation in this category at 2.2%. This data reveals that while overall inflation remained controlled, there were significant concerns in essential food categories, particularly pulses, cereals, and vegetables, which could impact food security and household budgets for the average Indian consumer. The deflationary trend in fuel and some food items provides a counterbalance, but the high inflation in essential food items requires careful monitoring and potential policy interventions.
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