India’s Retail Inflation in August 2022

India’s retail inflation has reached 7 per cent in August 2022 – well above the RBI’s comfort level of 6 per cent.

Key facts
  • India’s Consumer Price Index (CPI)-based inflation has returned to 7% in August 2022.
  • In July 2022, the retail inflation had reduced to a five-month low of 6.71%, after spending the three months above 7%.
  • The retail inflation stayed above 6% for eight consecutive months.
  • It had spent the 35 consecutive months above the RBI’s medium-term target of 4 per cent.
  • With average retail inflation at 6.3 per cent in January-March and 7.3 per cent in April-June, the retail inflation must reduce to at least 4.1 per cent in September for July-September average to come under 6 per cent.
  • According to the RBI, the inflation is expected to average at 7.1 per cent in July-September.
  • The return to the 7% level in August is mainly because of the surge in food prices.
  • Inflation in food basket has spiked to 7.62% in August – a significant increase from 3.11% in August 2021.
  • Food inflation accounts for nearly 50 per cent of the CPI basket.
  • The surge is largely because of increase in prices of essential crops such as wheat, rice and pulses caused by a record heatwave.
  • There is a 10% increase in the inflation rate of vegetables, spices, footwear and fuel and light on annual basis.
  • However, the prices of eggs have reduced and inflation in protein-rich meat and fish have flattened in the August.
What is retail inflation?

Retail inflation or the CPI-based inflation is the increase in prices of goods and services purchased by households for daily consumption. It is measured in Consumer Price Index (CPI), which is the weighted average of prices of a basket of goods and services that are sold in retail prices. The CPI measures changes in the retail prices of essential goods like food, fuel etc., as well services such as healthcare, transportation and others.

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