Prices and Inflation

Inflation Trends

• Inflation witnessing moderation since 2014.
• Consumer Price Index (CPI) inflation increased from 3.7 per cent in 2018-19 (April to December, 2018) to 4.1 per cent in 2019-20 (April to December, 2019).
• WPI inflation fell from 4.7 per cent in 2018-19 (April to December, 2018) to 1.5 per cent during 2019-20 (April to December, 2019).

Drivers of CPI - Combined (C) inflation

During 2019-20 (April-December), food and beverages was the main contributor.

• Among food and beverages, inflation in vegetables and pulses was particularly high due to low base effect and production side disruptions like untimely rain.

Cob-web Phenomenon for Pulses

Measures to safeguard farmers like procurement under Price Stabilisation Fund (PSF), Minimum Support Price (MSP) need to be made more effective.

• Divergence between Retail and Wholesale price.
• Observed for essential agricultural commodities in four metropolitan cities of the country from 2014 to 2019.

Volatility of Prices

Volatility of prices for most of the essential food commodities with the exception of some of the pulses has actually come down in the period 2014-19 as compared to the period 2009-14.

• Lower volatility might indicate the presence of better marketing channels, storage facilities and effective MSP system.

Regional Variations

CPI-C inflation has been highly variable across States ranging between (-) 0.04 per cent to 8.1 per cent across States/UTs in financial year (FY) 2019-20 (April-December).

• In most states, CPI-C inflation in rural areas is lower than the CPI-C inflation in urban areas. Rural inflation has been more variable across states than urban inflation.