{"id":37302,"date":"2023-09-13T07:49:47","date_gmt":"2023-09-13T02:19:47","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=37302"},"modified":"2025-04-22T12:55:34","modified_gmt":"2025-04-22T07:25:34","slug":"inflation-2","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/inflation-2\/","title":{"rendered":"Inflation in India: Key Takeaways from the Recent NSO Data"},"content":{"rendered":"<h3><strong>What\u2019s in Today\u2019s Article?<\/strong><\/h3>\n<ul>\n<li><strong>Why in News?<\/strong><\/li>\n<li><strong>Understanding Inflation<\/strong><\/li>\n<li><strong>Highlights of the Recent NSO Data<\/strong><\/li>\n<li><strong>Key Takeaways from the Recent NSO Data<\/strong><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Why in News?<\/strong><\/h2>\n<ul>\n<li>According to the latest National Statistical Office (NSO) data, India\u2019s retail inflation rate eased to 6.83% in August from a 15-month high of 7.44% in July 2023, mainly due to a slide in prices of food items, especially vegetables.<\/li>\n<li>However, it continued to remain above the upper limit of the 4+\/-2% band of Reserve Bank of India\u2019s (RBI) medium-term inflation target.\u00a0<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Understanding Inflation:<\/strong><\/h2>\n<ul>\n<li><strong>Meaning:<\/strong>\n<ul>\n<li><strong>Inflation is a rise in prices<\/strong>, which can be translated as the decline of purchasing power over time.<\/li>\n<li><strong>The rate at which purchasing power drops<\/strong> can be reflected in the average price increase of a basket of selected goods and services over some period of time.<\/li>\n<li>The rise in prices, which is often expressed as a percentage, <strong>means that a unit of currency effectively buys less than it did in prior periods<\/strong>.<\/li>\n<li>Inflation can be contrasted with <strong>deflation<\/strong>, which occurs when prices decline and purchasing power increases.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Causes:<\/strong>\n<ul>\n<li><strong><img decoding=\"async\" src=\"https:\/\/vajiramandravi.s3.us-east-1.amazonaws.com\/media\/editor_images\/2023\/9\/13\/13\/23\/47\/65016a8b6d9f2605a3c8ae7b_OI.PNG\" \/><\/strong><\/li>\n<\/ul>\n<\/li>\n<li><strong>Types:<\/strong>\n<ul>\n<li><strong>The Consumer Price Index (CPI): <\/strong>The CPI is a measure that examines the weighted average of prices of a basket of goods and services <strong>at the consumer\/retail level<\/strong>.<\/li>\n<li><strong>The Wholesale Price Index (WPI): <\/strong>It measures and tracks the changes in the price of goods in the stages before the retail level.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Inflation targeting in India:<\/strong>\n<ul>\n<li><strong>The RBI Act 1934<\/strong> provides a statutory and institutional framework for ensuring price stability while maintaining the objective of growth.<\/li>\n<li><strong>The RBI Act was amended by the Finance Act 2016<\/strong> to constitute a Monetary Policy Committee (MPC).<\/li>\n<li>The MPC will release the bimonthly Monetary Policy Report<strong>, for fixing the benchmark interest rate<\/strong> in India, bringing more transparency and accountability in fixing India&#8217;s Monetary Policy.<\/li>\n<li><strong>The current mandate<\/strong> of the MPC is to maintain <strong>4% (+\/-2%)<\/strong> annual inflation rate (CPI) and the committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive quarters.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Highlights of the Recent NSO Data:<\/strong><\/h2>\n<ul>\n<li>The retail inflation of <strong>6.83%<\/strong> in August 2023 <strong>makes it the 4th instance of headline inflation staying higher than the upper limit of the target<\/strong> during this calendar year and the seventh such instance since August 2022.\n<ul>\n<li>High inflation is being seen as a concern by policymakers.<\/li>\n<li>In its monetary policy review last month, <strong>the RBI had kept the key repo rate unchanged at 6.50%<\/strong> but had hiked the inflation projection from 5.1 to 5.4% for FY2024.<\/li>\n<\/ul>\n<\/li>\n<li><strong>In the Index of Industrial Production (IIP),<\/strong> manufacturing in absolute terms improved to 141.2 in July from 135 a year ago and 141.1 in the previous month.<\/li>\n<li><strong>The worrisome area is the contraction of 2.7% yoy in consumer durables<\/strong> in July 2023 and reflective of the weakness and skewness in consumption demand.<\/li>\n<\/ul>\n<figure class=\"media\">\n<div data-oembed-url=\"https:\/\/www.youtube.com\/watch?v=UIXVosEAP7I\">\n<div><iframe src=\"https:\/\/www.youtube.com\/embed\/UIXVosEAP7I\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/div>\n<\/div>\n<\/figure>\n<h2>\u00a0<\/h2>\n<h2><strong>Key Takeaways from the Recent NSO Data:<\/strong><\/h2>\n<ul>\n<li><strong>Consumer sentiments drop:<\/strong>\n<ul>\n<li><strong>The consumer sentiment fell by 1.5%<\/strong> in August 2023, after rising every month since January 2023.<\/li>\n<li>This drop in sentiments <strong>can have a real impact on the economy and Indian businesses<\/strong> who are gearing up for making the best sales of the year in the forthcoming festive season.<\/li>\n<li>That\u2019s because one of the key constituents of consumer sentiment index &#8211; the c<strong>onsumers\u2019 intention to buy consumer durables<\/strong> (cars, TVs, etc.) \u2013 is witnessing a drop.<\/li>\n<li>It is not just the <strong>stagnation in perceived incomes<\/strong> that may be dragging sentiments, there\u2019s also been a rise in <strong>pessimism regarding future incomes.<\/strong><\/li>\n<\/ul>\n<\/li>\n<li><strong>Inflation expected to stay high:<\/strong>\n<ul>\n<li>As per the RBI projection, <strong>inflation is expected to remain above 5%<\/strong> till the first quarter of 2024-25 and is likely to hit the 6.2% level in the ongoing quarter (July-September) &#8211; outside the RBI\u2019s comfort zone.<\/li>\n<li><strong>While overall food inflation has moderated<\/strong>, the worrying aspect is the upward momentum in the food items like cereals, pulses and milk.<\/li>\n<li>There is risk of <strong>further upward pressure on food inflation given the skewed rainfall and low reservoir levels<\/strong>. The recent spike in global crude oil prices is also concerning.<\/li>\n<li>However, a comforting factor is that the continued deflation in the WPI will have a lagged impact on CPI inflation going forward.<\/li>\n<li>Also, the Central government announced a cut in cooking gas price by Rs 200\/cylinder, which will benefit all the domestic LPG consumers and the beneficiaries under the <strong>Pradhan Mantri Ujjwala Yojana (PMUY)<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<li><strong>India\u2019s GDP growth outlook:<\/strong>\n<ul>\n<li>India\u2019s potential GDP growth rate has steadily come down from around 8% just before the Global Financial Crisis of 2008-09 to just 6% before the Covid pandemic.<\/li>\n<li><strong>The potential GDP growth rate<\/strong> of an economy is the rate at which its GDP can grow without causing high inflation.<\/li>\n<li>The bump in India\u2019s GDP growth rates immediately after the pandemic hit year of 2020-21 is mainly because of a lower base.<\/li>\n<li><strong>India\u2019s GDP growth is facing all kinds of headwinds<\/strong> such as a slowing global economy, high oil prices and climate change to name a few.<\/li>\n<li>Economists estimate that the Indian economy<strong> cannot grow more than 5% over the coming decade<\/strong> in a business-as-usual scenario.<\/li>\n<li>While a growth rate of 4% to 5% will still be attractive from a global perspective, <strong>it is not sufficient from the domestic perspective where millions of young Indians need jobs<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h3><strong>Q1) What is the Pradhan Mantri Ujjwala Yojana (PMUY)?<\/strong><\/h3>\n<p>PMUY was launched on 1 May 2016 to distribute 50 million LPG connections to women of Below Poverty Line families. A budgetary allocation of \u20b980 billion was made for the scheme. The scheme was replaced by the Ujjwala Yojana 2.0 in 2021.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Q2) What is the objective of the National Statistical Office (NSO) of India?<\/strong><\/h3>\n<p>The NSO formulates the development of the statistical system in the country. It maintains norms and standards in the field of statistics acting as a nodal agency. The Government of India receives guidelines on the statistical analysis of data and methodology from the NSO.<\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p><strong>Source:<\/strong> <a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/explainspeaking-inflation-consumer-sentiments-gdp-growth-outlook-hindu-rate-8936056\/\" target=\"_blank\" rel=\"nofollow noopener\"><u>ExplainSpeaking: Inflation up, consumer sentiments down and GDP growth outlook tending towards the Hindu rate<\/u><\/a><u> | <\/u><a href=\"https:\/\/indianexpress.com\/article\/business\/economy\/india-retail-inflation-cpi-consumer-price-index-august-rbi-8936584\/\" target=\"_blank\" rel=\"nofollow noopener\"><u>IE<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Inflation is a rise in prices, which can be translated as the decline of purchasing power over time<\/p>\n","protected":false},"author":5,"featured_media":37303,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-37302","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/37302","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=37302"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/37302\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/37303"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=37302"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=37302"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=37302"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}