India’s April Retail Inflation Eases Marginally to 4.83%
The Consumer Price Index (CPI) showed that retail inflation in India slowed down a bit in April. The rate went down a little from 4.85% in March to 4.83%, according to the National Statistical Office. Some of this small drop was caused by lower prices in the fuel and light sectors.
Components of Inflation and Economic Factors
However, food prices went up from 8.52% to 8.7%, while core prices stayed low. Food and core inflation are still not rising at the same rate, which makes things more difficult for the Monetary Policy Committee (MPC), especially since real interest rates are seen as “excessive.” Foods like cereals, meat, fish, eggs, veggies, and pulses all had persistently high inflation rates. These stresses might be balanced out by the hope of a good rainy season, which could increase crop yields and keep prices stable.
Non-Food Inflation and Monetary Responses
Consumer prices stayed the same for things other than food, like clothes, shoes, home goods, services, and fun and games. Still, the persistently high food inflation creates a lot of unpredictability, which affects the MPC’s policy choices. The governor of the Reserve Bank of India (RBI), Shaktikanta Das, said that people should be careful about how food prices change, implying that these changes might not have short-term effects.
What is the Consumer Price Index?
A weighted average market basket of goods and services that families buy is used to figure out changes in the Consumer Price Index (CPI). It’s a statistical guess based on the prices of a group of typical things whose prices are gathered regularly. For each group of goods and services, sub-indices and sub-sub-indices are calculated, and these are then added together to make the total index. CPI changes are used to figure out how much prices have changed because of the cost of living, to change salaries, wages, and benefits, to keep prices stable, and to deflate money amounts to show how much they’ve changed in real terms. In most countries, the CPI is used to measure inflation as well as to match pensions and pay to prices. One of the most-watched pieces of national economic data is this measure.
About Monetary Policy Committee
- Formation and Purpose: To control inflation, the Monetary Policy Committee (MPC) sets interest rates in a country.
- Historical Context: The MPC was created in 1997 in the UK and is very important in making economic decisions.
- Composition: The MPC is usually made up of nine people, including the governor of the central bank, two deputy governors, the top economist, and foreign experts.
- Operating Frequency: The group meets about every six weeks to look at interest rates and set them.
- Decision-Making Process: The MPC makes decisions by voting on what the majority of its members think.
- Transparency Measures: To keep things open, the minutes of the MPC meetings are made public, which include a record of what was talked about and why choices were made the way they were.
- Global Examples: Similar to the UK, India set up its MPC in 2016 with the stated goal of keeping annual inflation at 4%, with a tolerance range of +/- 2%.
- Economic Impact: The MPC’s choices have a big effect on important economic factors like monetary policy, interest rates, and employment rates.
- Role in Economic Stability: Monetary policy committees (MPCs) play a key role in keeping the economy stable by adapting monetary policies to the prevailing economic circumstances.
Month: Current Affairs - May, 2024
Category: Economy & Banking Current Affairs