Inflation is very important in determining purchasing power. In other words, inflation is a metric that causes the prices of goods to increase over time, and buyers will feel the consequences as it affects their personal finances, especially their spending and purchases. habits.
One way to perceive inflation is, for example, that you bought a list of must-have items last month worth INR 1000, but this month, the value of an express food item on the same list has increased, causing the value to increase. It costs, say, INR 1. 100. Es you may be forced to remove an item from your cart or buy the product at an inflated price by paying more, which can affect your monthly budget.
Therefore, anything that causes the prices of goods to rise in the market and creates instability in consumption leads to inflation. Economists suggest that achieving moderate inflation enough to increase consumption will broaden the base for economic growth. However, peak inflation indicates that an economy is facing serious difficulties, while low inflation, i. e. , deflation, is equally problematic.
Two indices measure inflation in India: the consumer price index (CPI) and the wholesale price index (MPI). These two metrics measure inflation on a monthly basis, other ways of calculating the recovery of costs of goods and services. The study is helping the government and the RBI understand the movement of market prices and thus keep an eye on inflation.
The CPI, the customer value index, analyzes retail inflation of goods and facilities in the economy for 260 products. CPI-based retail inflation takes into account changes in the prices at which customers purchase goods. Data is collected through the Ministry of Statistics and Program Implementation and the Ministry of Labor.
The WPI, which stands for Wholesale Price Index, analyzes inflation for only 697 products. Wholesale inflation based on the WPI takes into account the change in prices at which consumers buy goods wholesale or at wholesale prices from factories, mantises, etc.
India’s retail inflation, as measured through the Consumer Price Index (CPI), fell to 4. 75% in May from 4. 83% in April 2024, according to the latest data from the Ministry of Statistics and Program Implementation. The CPI last bottomed at 4. 25% in May 2023.
The wholesale price index (WPI), which calculates the total of goods before selling them at retail, rose to 1. 26% in April from 0. 53% in March this year.
Here is a list of the country’s inflation measured through the CPI and WPI indexes so you can perceive how costs have changed over time.
(*Government of India has released the CPI inflation rate for April and May 2020 due to the nationwide lockdown induced by the Covid-19 pandemic. )
June 12, 2024: Retail trade in India fell to a 12-month low of 4. 75% in May
India’s retail inflation fell to 4. 75 in May 2024, its lowest point in 12 months since May 2023. Core inflation declined to 3. 1 in May from 3. 2 in April 2024. However, food inflation remains solid at 8. 69.
“These figures are very likely to reassure the Reserve Bank of India (RBI) about the downward trend in inflation, echoing recent discussions at the MPC meeting,” said Raghvendra Nath, managing director at Ladderup Wealth Management.
Nath explained that bond markets deserve to definitely react to this update, unless the expected release of the US CPI. and the FOMC sign an unexpected reversal of aggressive trend.
The Reserve Bank of India (RBI) suspended rate hikes and kept the benchmark repo rate unchanged at 6. 50%. RBI Governor Shanktikanta Das stated that the Monetary Policy Committee would remain focused on taking accommodative flight measures if warranted so that inflation does not hamper customer expansion and take the immediate and appropriate steps needed to keep inflation expectations firmly anchored and bring inflation back to target. .
The RBI forecasts headline inflation or CPI for the first quarter of FY25, the second quarter of FY25, the third quarter of FY25, and the fourth quarter of FY2 at 5%, 4%, 4. 6%, and 4. 7%, respectively. Real GDP Expansion is projected at 6. 5%, with a first quarter of 8. 0%. The central bank expects genuine GDP expansion of 7% for the 2024-2025 fiscal year.
Many participants believe that the RBI is on track to balance the country’s expansion and inflation, but if the upward pressure on prices persists, the stock market will likely face its impact in the short and medium term.
Meanwhile, April 2024 US inflation suggests the Customer Value Index declined to 3. 4% year-over-year, from 3. 5% in March.
In the past, the government announced a series of measures to mitigate inflation: relief from excise duty on petrol and diesel and relief from import duties on critical raw fabrics and crude edible oils, to name just a few. On the other On the other hand, the RBI attempts to inflate through expansion of the repo rate (the interest rate or charge imposed on public and personal banks to borrow cash from the central bank, in order to maintain supply and requisition of goods and facilities. At the same time, emerging repo rates force banks to increase lending rates and deposit rates.
It is imperative to be monetarily disciplined, not only when it comes to your spending and purchasing habits, but also in your savings and investments. Choosing the right investment tool is the only way to remain financially secure, which not only satisfies your private monetary desires to give you the risk you’re willing to take, but also allows your savings to grow enough to triumph over inflation.
Related: Are we already in a recession?
Managing your private finances is one of the tactics to beat inflation.
Doing the same thing consistently will help you achieve your monetary goals through more optional wealth accumulated over time. This will also combat inflation and address the depreciation of the Indian currency against the US dollar.
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