Focus: GS-III Indian Economy
Why in news?
Retail inflation softened slightly to 6.69% in August 2020, even as food prices continued to rule high, official data showed.
- The government has revised downwards the retail inflation for July to 6.73% from the earlier estimate of 6.93%.
- Food inflation during the month stood at 9.62%.
- Food inflation in August fell marginally to 9.05%, according to the Consumer Price Index (CPI) data.
- The retail inflation, mainly taken into account by the RBI to arrive at its policy decisions, has been above the regulator’s comfort level.
- The government has mandated the central bank to restrict the inflation at 4% (+/- 2%).
Consumer Price Index (CPI)
- The Consumer Price Index (CPI) tracks the change in retail prices of goods and services which households purchase for their daily consumption.
- To measure inflation, we estimate how much CPI has increased in terms of percentage change over the same period the previous year.
- The Central Bank (RBI) pays very close attention to this figure in its role of maintaining price stability in the economy.
- Generally, CPI is used as a macroeconomic indicator of inflation, as a tool by the central bank and government for inflation targeting and for inspecting price stability, and as deflator in the national accounts.
- CPI also helps understand the real value of salaries, wages, and pensions, the purchasing power of the nation’s currency, and regulating rates.
-Source: The Hindu