Inflation is crucial to determine one’s purchasing power. In other words, inflation is a measure that causes the prices of both goods and services to rise over time and buyers will feel the pinch as it affects their personal finance, particularly spending and buying habits.
One way of understanding inflation is, for instance, you bought a list of household essentials last month at an expense of INR 1,000, but this month the price of a certain food item in the same list has risen and that has led to an increase in the cost by let’s say INR 1,100. You may be either forced to remove an item from your cart or buy the product that has the inflated price by paying extra which may affect your monthly-set budget.
Therefore, any factor that causes prices of goods and services to rise in the market and create instability in consumption leads to inflation. Economists suggest that achieving inflation that’s moderate enough to drive consumption will create a baseline of growth in the economy. However, high inflation indicates that an economy is facing serious troubles; whereas, low inflation, a.k.a. deflation is equally worrisome.
How to Calculate Inflation Rate In India?
There are two indices that are used to measure inflation in India — the consumer price index (CPI) and the wholesale price index (WPI). These two measure inflation on a monthly basis taking into account different approaches to calculate the change in prices of goods and services. The study helps the government and the Reserve Bank of India (RBI) to understand the price change in the market and thus keep a tab on inflation.
The CPI, which refers to the Consumer Price Index, analyzes the retail inflation of goods and services in the economy across 260 commodities. The CPI-based retail inflation considers the change in prices at which the consumers buy goods. The data is collected separately by the Ministry of Statistics and Program Implementation and the Ministry of Labour.
The WPI, which refers to the Wholesale Price Index, analyzes the inflation of only goods across 697 commodities. The WPI-based wholesale inflation considers the change in prices at which consumers buy goods at a wholesale price or in bulk from factory, mandis, etc.
Average Inflation Rate in India (Last Year)
The country’s retail inflation, which is measured by the consumer price index (CPI), slipped to an 18-month low of 4.70% in Apr. 2023. Inflation data on the wholesale Price Index (WPI), which calculates the overall prices of goods before selling at retail prices, eased 1.34% in Mar. 2023.
The inflation rate rose 4.70% in April, from 5.66% in March, 6.44% in February, and 6.52% in January, this year. CPI hit the highest of 7.79% in Apr. 2022.
Average Inflation Rate in India (Last 10 Years)
Here’s a list of the country’s inflation as measured in both CPI and WPI indices to help you understand the change in price over time.
Latest Inflation News in India (Updated Apr. 18, 2023)
May. 15, 2023: CPI inflation cooling off, eases to 18-month low
The CPI reading of Apr. 2023 is the latest indicator that India inflation is falling, coming under the Reserve Bank of India’s (RBI) upper tolerance limit of 6%.
In a monetary policy meeting held on Apr. 6, the central bank had decided to pause its consecutive rate hikes and keep the benchmark repo rate at 6.50%.
Inflation has repeatedly found mention in the RBI monetary policy committee’s reviews. The RBI projects FY24 inflation at 5.2%, and is optimistic that CPI inflation will moderate this fiscal.
Das earlier said the MPC decided to remain focused on withdrawal of accommodation to ensure inflation progressively aligns with the target while supporting growth. He is confident the RBI is on the right track to bring down inflation to the target rate over the medium term.
Moving forward, the inflation trajectory largely depends on the prices of domestic commodities like vegetables, cereals, spices, etc. Earlier, the RBI had blamed effects of the pandemic, the geo-political conflict, and the weakness in the Indian rupee manifesting in the demand-supply mismatch of goods and services, leading to downside risks to growth.
The Apr. 2023 inflation in the US is also cooling off. The inflation rate rose 4.9% in Apr, from 5% in March, 6% in February, and 6.4% in January, this year. The economists had projected that the U.S Federal Reserve will slow interest rate increases and potentially stop hiking in 2023.
How To Beat Inflation In 2023?
The government, in the past, has announced a series of measures to ease inflation — cut the excise duty on petrol and diesel, reduce import duty on key raw materials and crude edible oils, to name a few. On the other hand, one way the RBI tries to control inflation is by increasing the repo rate (the rate of interest or cost levied upon public and private banks for borrowing money from the apex bank), in order to control and supply and demand of goods and services. Simultaneously, the increase in repo rates compels banks to increase interest rates on loans and deposit rates.
Hence, it is important to ensure that you’re financially disciplined, not just about your spending and buying habits but about your savings and investments too. Choosing the right investment instrument is the one way to remain financially safe, which not only suits your personal finance needs given the risk you are willing to take, but also allows your savings to grow enough to beat inflation.
How to Calculate Inflation Rate In India?
There are two indices that are used to measure inflation in India — the consumer price index (CPI) and the wholesale price index (WPI). These two measure inflation on a monthly basis taking into account different approaches to calculate the change in prices of goods and services. The study helps the government and the Reserve Bank of India (RBI) to understand the price change in the market and thus keep a tab on inflation.
The CPI, which refers to the Consumer Price Index, analyzes the retail inflation of goods and services in the economy across 260 commodities. The CPI-based retail inflation considers the change in prices at which the consumers buy goods. The data is collected separately by the Ministry of Statistics and Program Implementation and the Ministry of Labour.
The WPI, which refers to the Wholesale Price Index, analyzes the inflation of only goods across 697 commodities. The WPI-based wholesale inflation considers the change in prices at which consumers buy goods at a wholesale price or in bulk from factory, mandis, etc.
Bottom Line
Managing your personal finances is one of the ways to beat inflation.
- Categorize your finances to meet long-term, mid-term, and short-term goals.
- Plan your savings and choice of investment instruments.
- Increase savings + investment amount as per the growth in your income.
Following the suit consistently will help you achieve your financial goals with an optional extra wealth accumulated over time, and also combat inflation as well as meet the depreciating value of the Indian currency against the U.S. dollar.
To know the latest interest rates on home loans, click here.
To know the current interest rates on personal loans, click here.
Click here to know the latest interest rate on gold loans.
