inflation-eases-to-429

Context: India’s retail inflation slowed to a three-month low of 4.29% in April 2021, from 5.52% in March 2021 helped by softer food prices as well as a base effect.

More in the news:

  • National Statistical Office data showed 
    • Industrial output surged by 22.4% in March, lifted by the statistical impact of the year-earlier period’s Index of Industrial Production (IIP) being significantly lower on account of the national lockdown to contain COVID-19 imposed that month.
    • Retail food inflation eased to 2.02% in April, from 4.87% in the preceding month, with rural India recording a mere 1.45% food inflation compared with almost 4% in March.
      • Overall rural retail inflation was 3.82%, slower than the 4.77% pace averaged in urban areas.
    • The March IIP data showed manufacturing grew by 25.8%.
    • Electricity generation grew by 22.5% over the year-earlier period, when industrial activity had collapsed 18.7% in the wake of the COVID-19 lockdown.
    • For 2020-21, industrial output shrank by 8.6%, compared with a 0.8% contraction in 2019-20.
    • Manufacturing contracted by 9.8% in the year, while mining production shrank 7.8%. 
      • Electricity seemed to have recovered from the initial shock, dipping just 0.5% over the full financial year.
  • Experts observed that as the lockdown base fades away, the CPI inflation is expected to bounce back to an average of 5% in the remainder of the first half, ruling out the possibility of further rate cuts by RBI.

Related Facts:

  • Weak demand conditions started to reflect in economic data.
  • The retail inflation rate eased despite the impact of higher fuel prices as core inflation (the non-food, non-fueling inflation component) declined to a 10 month low of 5.43% in April 2021.

Retail inflation:

  • It is measured by Consumer Price Index (CPI).
  • It is the inflation experienced at retail shops in the actual reflection of the price rise in the country.
  • It also shows the cost of living better.

Consumer Price Index (CPI):

  • Consumer Price Index or CPI is the measure of changes in the price level of a basket of consumer goods and services bought by households. 
  • CPI is based on 260 commodities but includes certain services too. 

Headline Inflation:

  • Headline Inflation is the measure of total inflation within an economy. 
  • It includes price rise in food, fuel and all other commodities.
  • The wholesale Price Index (WPI) usually denotes the headline inflation. 

Core Inflation (Underline Inflation or Non-food Inflation):

  • Core inflation is also a term used to denote the extent of inflation in an economy. 
  • Core inflation does not consider the inflation in food and fuel. 
  • It is measured by excluding food and fuel items from the Wholesale Price Index (WPI) or Consumer Price Index (CPI).

The National Statistical Office;

  • NSO is the central statistical agency of the Government-mandated under the Statistical Services Act 1980 under the Ministry of Statistics and Programme Implementation.
  • It is responsible for the development of arrangements for providing statistical information services to meet the needs of the Government and other users for information on which to base policy, planning, monitoring and management decisions.
    • The services include collecting, compiling and disseminating official statistical information.
      • All business operations in NSO are done in compliance with international standards, procedures and best practices.

Index of Industrial Production (IIP):

  • IIP is a composite indicator measuring changes in the volume of production of a basket of industrial products over a period of time, with respect to a chosen base period.
  • It is compiled and published on a monthly basis by the CSO with a time lag of six weeks from the reference month.

Source: The Hindu, The Indian Express.