Retail inflation has come down to 5.48% in the month of November. This is 0.73% less than the previous month. Retail inflation had reached 6.21% in October due to the cost of food items. This was the highest level in 14 months. Now inflation has come down due to the reduction in the prices of food items. Food items contribute about 50% to the inflation basket. Inflation figures compared to October How does inflation affect?
Inflation is directly related to purchasing power. For example, if the inflation rate is 6%, then the value of 100 rupees earned will be only 94 rupees. Therefore, investment should be done keeping inflation in mind. Otherwise, the value of your money will decrease. How does inflation increase and decrease?
Inflation increases and decreases depend 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 the supply is not according to the demand, the price of these things will increase. In this way the market falls prey to inflation. Simply put, excessive flow of money in the market or shortage of goods causes inflation. On the other hand, if demand is less and supply is more, then inflation will be less. Inflation is determined by CPI. As a customer, you and I buy goods from the retail market. The Consumer Price Index i.e. CPI shows the changes in the prices related to it. CPI measures the average price we pay for goods and services. Apart from crude oil, commodity prices, manufactured cost, there are many other things which play an important role in determining the retail inflation rate. There are about 300 goods, on the basis of whose prices the retail inflation rate is decided.
