Inflation, or a rise in the general price level of goods and services, has long been a subject of concern and debate around the world. It affects everything from the cost of groceries and housing to the economy’s overall health. As the nation gears up for the upcoming general elections, it becomes crucial to delve into inflation in India to better understand the country’s economic situation.
This article aims to provide insights into the Indian inflation rate in 2024 and its implications.
India’s current inflation rate
According to the data released by the Ministry of Statistics and Programme Implementation, India’s consumer price index inflation was marginally up at 3.65 percent in August 2024. The corresponding inflation rate for rural and urban is 4.16 percent and 3.14 percent, respectively. MOSPI statement says the inflation for August 2024 is the second lowest since June 2023. The Y-o-Y inflation rate based on the All India Consumer Food Price Index (CFPI) is 5.66 percent (Provisional) for August. The corresponding inflation rates for rural and urban areas are 6.02 percent and 4.99 percent, respectively.
On the other hand, India’s wholesale inflation cooled to a four-month low at 1.31 percent in August 2024. It stood at 2.04 percent in July, according to the provisional data released by the Ministry of Commerce and Industry. It was at (-)0.46 percent in August last year.
“Positive rate of inflation in August 2024 is primarily due to increase in prices of food articles, processed food products, other manufacturing, manufacture of textiles and manufacture of machinery & equipment etc,” the industry ministry said in a statement.
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India Inflation Rate (CPI) – Historical Data
| Year | Average Inflation Rate | Annual Change |
|---|---|---|
| 2024 | 3.65 (July) | -3.18% |
| 2024 | 5.09 (February) | -0.4% |
| 2023 | 5.49 | -1.21% |
| 2022 | 6.7% | 1.57% |
| 2021 | 5.13% | -1.49% |
| 2020 | 6.62% | 2.89% |
| 2019 | 3.73% | -0.21% |
| 2018 | 3.94% | 0.61% |
| 2017 | 3.33% | -1.62% |
| 2016 | 4.95% | 0.04% |
| 2015 | 4.91% | -1.76% |
| 2014 | 6.67% | -3.35% |
| 2013 | 10.02% | 0.54% |
Also Read: Fiscal deficit: Meaning, history in India, causes, current deficit and more
India Inflation Rate (WPI) – Last One Year Data
| Month (FY24) | Wholesale Purchase Index Rate |
|---|---|
| August 2024 | 1.31% |
| July 2024 | 2.04% |
| June 2024 | 3.43% |
| May 2024 | 1.26% |
| April 2024 | 0.53% |
| March 2024 | 0.20% |
| February 2024 | 0.27% |
| January 2024 | 0.73% |
| December 2023 | 0.26% |
| November 2023 | -0.52% |
| October 2023 | -0.26% |
| September 2023 | -0.52% |
| August 2023 | -1.36% |
| July 2023 | -4.12% |
| June 2023 | -3.48% |
| May 2023 | -0.92% |
| April 2023 | 1.34% |
What is 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. 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. The index is often used to adjust wages, pensions, and government benefits to account for changes in purchasing power.Also Read: US inflation rate by year: 2012 to 2023
What is WPI?
The Wholesale Price Index measures changes in the average price level of goods traded in bulk or at the wholesale level. It is primarily used 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. It is often used by policymakers, businesses, and analysts to monitor inflationary pressures within the economy and make decisions based on the price trends in the wholesale market.Also Read: GDP of India: Current and historical growth rate, India’s rank in the world
How is inflation calculated?
Calculating the inflation rate involves the use of a formula:((B – A) / A) x 100where A represents the initial value, and B represents the final value.To use this formula, you need the initial and final values of the consumer price index (CPI) for a specific good or service. By subtracting the initial value from the final value, you determine the difference between the two numbers.This difference indicates the increase in the CPI for that specific good or service. To find the inflation rate, divide the difference by the initial value (the value recorded for the past date) to obtain a decimal figure.To express this decimal as a percentage, multiply it by 100. The resulting number represents the inflation rate.Also Read: Cost inflation index (CII) for FY 2023-24 to calculate capital gains
Types of Inflation
There are several types of inflation, each characterised by its underlying causes and effects. Here are some common types of inflation:
- Demand-Pull Inflation: This occurs when aggregate demand in an economy outpaces the supply of goods and services. It is typically fueled by factors such as increased consumer spending, expansionary fiscal policies, or excessive money supply. Demand-pull inflation leads to rising prices as businesses struggle to meet the high demand.
- Cost-Push Inflation: Cost-push inflation arises from increases in production costs, such as wages, raw materials, or taxes. When businesses face higher input costs, they pass on the additional expenses to consumers through higher prices. Cost-push inflation can be triggered by factors like rising energy prices, changes in government regulations, or supply chain disruptions.
- Built-In Inflation: Built-in inflation is a self-perpetuating cycle of price increases driven by inflation expectations. It occurs when workers and businesses anticipate future inflation and negotiate higher wages and prices to protect their purchasing power. This leads to an upward spiral of wages, production costs, and prices.
- Hyperinflation: Hyperinflation is an extreme and rapid form of inflation where prices skyrocket uncontrollably. It typically occurs due to a severe collapse in confidence in the currency, often caused by excessive money printing, political instability, or economic crises. Hyperinflation erodes the value of money and can have devastating effects on an economy.
- Stagflation: Stagflation refers to a combination of stagnant economic growth, high unemployment, and inflationary pressures. It presents a challenging situation for policymakers because traditional measures to stimulate economic growth, such as lowering interest rates or increasing government spending, can exacerbate inflation.
- Disinflation: It refers to a decrease in the rate of inflation. It means that while prices are still rising, they are doing so at a slower rate compared to the past. Disinflation is often seen as a positive development as it brings relief from rapid price increases, but it is different from deflation, where overall prices decline.
Also Read: India forex reserves 2024: Exploring current status and historical trends
Frequently Asked Questions (FAQs)
1. What are the negative impacts of inflation on the economy?
Inflation has detrimental effects on the economy as it diminishes the purchasing power of individuals over time. It leads to a sustained increase in the prices of goods and services, reducing the affordability of essential items.
2. Who determines the inflation rate in India? The Government of India establishes the inflation target in India in accordance with the Reserve Bank of India (RBI). While the government sets an inflation target once every five years, the authority responsible for controlling inflation through monetary policies lies with the Reserve Bank of India.
