Winning Bizness Desk
Mumbai. Retail inflation in the country has come down to 6.44% in the month of February. In January 2023, it was at a three-month high of 6.52% and in December 2022 at 5.72%. Three months ago in November 2022, retail inflation was 5.88%. Last year in February 2022 it was 6.07%. There has been a slight increase in food items. On the other hand, there has been a slight decrease in the prices of pulses, rice and vegetables, due to which there has been a slight decline in the inflation rate. Food inflation has gone up to 5.95% in February 2023, which was 5.94% in January. Inflation has remained above the Reserve Bank of India's (RBI) upper tolerance level of 6% for the second consecutive month. Food items account for about half of the Consumer Price Index (CPI) basket. In the last month, the prices of food grains like wheat have decreased in the international and domestic market. The government has also increased the supply. This has also affected the retail inflation figures.
Bad weather, fall in rupee are the main reasons
Economists have opined that inflation is not likely to increase much for the next few quarters. But the pace of its reduction will be slow. The effect of more than 10% fall in rupee last year can also be seen on inflation. Barring food items and energy, there is currently no visible decline in core inflation. According to economists, it will remain above the limit of 6% in February. Due to this, there is no possibility of laxity in the monetary policy of RBI. Interest rates may increase further.
How does inflation affect?
Inflation is directly related to purchasing power. For example, if the inflation rate is 7%, then Rs 100 earned will be worth only Rs 93. That's why investing should be done keeping in mind the inflation. Otherwise the value of your money will decrease. The rise and occurrence of inflation depends on the demand and supply of the product. If people have more money, they will buy more things. Buying more things will increase the demand for things and if there is no supply according to the demand, the price of these things will increase. In this way the market becomes vulnerable to inflation. Simply put, excessive flow of money in the market or shortage of goods causes inflation. On the other hand, if the demand is less and the supply is more, then the inflation will be less.
How does RBI control inflation?
To reduce inflation, the flow of money (liquidity) in the market is reduced. For this, the Reserve Bank of India (RBI) increases the repo rate. Worried about rising inflation, RBI has recently increased the repo rate by 0.25%. Due to this the repo rate has increased from 6.25% to 6.50%. Apart from crude oil, commodity prices, and manufacturing cost, there are many other factors which play an important role in determining the retail inflation rate. There are about 299 items on the basis of whose prices the rate of retail inflation is fixed.
