Retail inflation fell to 4.85% in March, down from 5.09% in February, with prices of food and beverages decreasing. The Reserve Bank of India (RBI) has a target range of 2%-6% for inflation. In an ideal situation, the RBI would want retail inflation to remain at 4%.
Food inflation rate decreased from 8.66% to 8.52%, rural inflation increased from 5.34% to 5.45%, and urban inflation decreased from 4.78% to 4.14%.
How does inflation increase or decrease?
The increase or decrease in inflation depends on the demand and supply of products. If people have more money, they tend to buy more things. Increased demand leads to higher prices if the supply does not meet the demand.
In this way, the market falls prey to inflation. In simple terms, excessive flow of money in the market or shortages of goods lead to inflation. Conversely, if demand decreases and supply increases, inflation decreases. Inflation is determined by the CPI
As consumers, we purchase goods from the retail market. Consumer Price Index measures changes in the prices related to these purchases. It measures the average price that we pay for goods and services.
Apart from raw oil, commodity prices, and manufacturing costs, there are many other factors that play a crucial role in determining retail inflation rates. There are about 300 items based on whose prices the retail inflation rate is determined.