New Delhi: Retail inflation in India has decreased to below four percent for the first time in 59 months. The rate dropped to 3.54% in July, a significant decline from 5.08% in June. This marks the lowest level of inflation since August 2019. The reduction in inflation is largely attributed to a decrease in food prices. Food inflation, which had been at 9.36% in June, fell to 5.42% in July. This represents a major relief compared to July of the previous year, when food inflation was at 11.51%.

The government reported that the Consumer Price Index (CPI) showed this overall reduction in retail inflation. Urban areas saw inflation decrease from 4.39% in June to 2.98% in July, while rural areas experienced a drop from 5.66% to 4.10% over the same period. Food items, which constitute a significant portion of the inflation index, saw a substantial reduction in price increases. For example, the inflation rate for vegetables dropped from 29.32% in June to 6.83% in July. Similarly, the inflation for grains decreased from 8.75% to 8.14%, and for pulses, it fell from 16.07% to 14.77%. Fruit inflation also dropped from 7.15% to 3.84%.

Inflation measures the increase in the price of goods and services over time. For instance, if an item that cost Rs 100 a year ago now costs Rs 105, the annual inflation rate for that item is 5 percent. Increased inflation reduces the purchasing power of money, meaning that Rs 105 today would have only been worth Rs 100 a year ago. Inflation is currently assessed based on the 2012 price index. For example, an item that cost Rs 100 in 2012 now costs Rs 192.9. A year ago, it cost Rs 186.3, indicating an annual inflation rate of 3.54%.

India uses two primary indexes to measure inflation: the Consumer Price Index (CPI) and the Wholesale Price Index (WPI). CPI measures retail inflation, reflecting the changes in prices that consumers face in the retail market. Conversely, WPI tracks price changes in the wholesale market, where businesses and companies make their purchases. In India, CPI is the principal gauge for measuring inflation, though WPI is also used for broader economic assessments.

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