According to data released by the National Statistics Office (NSO), India’s retail inflation rate dropped to 5.09 percent in February 2024. This is the lowest it has been in the past four months. In January 2024, the inflation rate was slightly higher at 5.10 percent. It’s worth noting that the current inflation rate falls within the range set by the Reserve Bank of India (RBI), which is 2 to 6 percent. This means that the current inflation rate is considered acceptable by the RBI.
First let’s understand what is Inflation? Inflation is a term used to describe the general increase in prices of goods and services. It’s something that affects everyone, from the cost of groceries to the overall health of the economy. As India prepares for the upcoming general elections, it’s important to take a closer look at the country’s inflation rate to better understand its economic situation.
When we compare inflation in rural and urban areas, we find that the inflation rate in rural areas is slightly higher. In February, the rural inflation rate was 5.34 percent, which is 0.56 percent higher than the urban inflation rate of 4.78 percent. In December, the rural inflation rate was even lower at 4.34 percent.
Looking specifically at food inflation, we see that it increased in February to 8.66 percent from 8.3 percent in the previous month. This means that the prices of food items are rising at a faster rate compared to other goods and services.
Now, let’s have a look at the Last 10 years Inflation Rate in India.
| Year | Average Inflation Rate |
|---|---|
| 2024 | 5.09 (February) |
| 2023 | 5.49 |
| 2022 | 6.7% |
| 2021 | 5.13% |
| 2020 | 6.62% |
| 2019 | 3.73% |
| 2018 | 3.94% |
| 2017 | 3.33% |
| 2016 | 4.95% |
| 2015 | 4.91% |
| 2014 | 6.67% |
| 2013 | 10.02% |
How Inflation is Calculated?
Would you like to know this inflation rate is calculated? If yes, then scroll below and let’s understand the inflation formula.
Inflation is calculated using a formula that compares the initial value (A) to the final value (B) of a specific measure, such as the Consumer Price Index (CPI). The formula is as follows:
((B – A) / A) x 100
To calculate the inflation rate, subtract the initial value from the final value to determine the difference between the two numbers. This difference represents the increase in the specific measure (e.g., CPI) for that period. Divide the difference by the initial value and multiply the result by 100 to express it as a percentage. The resulting number represents the inflation rate.
What is CPI and WPI?
Consumer Price Index (CPI): The Consumer Price Index measures changes in the average price level of goods and services purchased by households over time. It is used to measure inflation and indicates the cost of living for consumers. The CPI is calculated by selecting a basket of goods and services that represent typical consumer purchases and tracking the changes in their prices over time. This index is often used to adjust wages, pensions, and government benefits to account for changes in purchasing power.
Wholesale Price Index (WPI): The Wholesale Price Index measures changes in the average price level of goods traded in bulk or at the wholesale level. It primarily serves as an indicator of inflation in the production and distribution stages of the economy. WPI tracks the price changes of goods before they reach the retail level and includes commodities such as raw materials, intermediate goods, and finished goods. Policymakers, businesses, and analysts use WPI to monitor inflationary pressures within the economy and make decisions based on price trends in the wholesale market.