Issues related to Economic growth

Inflation set to pick up in H2FY18: RBI

Note4Students:

Mains Paper 3| Indian Economy

Prelims: Inflation- WPI and CPI, GST

Mains level: Not much


Context

  1. Consumer price inflation is likely to pick up in the second half of 2017-18 with food prices set to rise.
  2. There has been a broad-based increase in CPI inflation excluding food and fuel.
  3. The RBI has kept the repo rate unchanged at 6 per cent in the bi-monthly monetary policy
  4. Inflation is expected to rise from its current level and range between 4.2-4.6 per cent in the second half of this year, including the house rent allowance by the Centre.

Why RBI feels that inflation will pick up?

  1. Early indicators show that prices of pulses which had declined significantly to undershoot trend levels in recent months, have now begun to stabilise.
  2. Some price revisions pending the goods and services tax (GST) implementation have been taking place.
  3. International crude prices, which had started rising from early July, have firmed up further in September.
  4. Implementation of farm loan waivers by states and salary and allowances

Back2basics

  • Consumer Price Index:CPI is used to monitor changes in the cost of living over time, it reflects the price of goods and services bought by the final consumers. The CPI compares the price of a fixed basket of goods and services to the price of the basket in the base year that is 2011-12. India has adopted CPI to measure inflation. CPI is calculated by Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation (MOSPI).
  • Whole sale Price Index: WPI is used to monitor the cost of goods and services bought by producer and firms rather than final consumers. WPI basket does not cover services. In IndiaOffice of Economic Advisor (OEA), Department of Industrial Policy and Promotion, Ministry of Commerce and Industry calculates the WPI. The new base year for WPI is 2011-12

 

 

 

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