Inflation Rate in India 2024: Current Trends and Analysis

byDilip PrasadLast Updated: August 16, 2024
Inflation Rate in India
Key Takeaways:
  • India’s inflation rate is used to measure the average increase in the prices of goods and services over time.
  • Impacts the cost of living and purchasing power significantly
  • Influencing factors include supply-side pressures such as production disruptions, rising raw material prices and demand-side pressures such as increased consumer spending.
  • RBI’s monetary policies, specifically the repo rate, serve as crucial factors for managing inflation.

Today, one of the key areas of focus in India is the rising inflation rate. With the rapid rise in the cost of living and the prices of essential goods and services, it becomes important to understand the causes of inflation and how it can be controlled. Inflation is the rate at which the general level of prices for goods and services rises in a specific period of time, and has widespread implications for the purchasing power and economy. 

In this blog, we will make you understand the current inflation rate in India in 2024, its causes, and its impacts on our economy and livelihood.

What is Inflation Rate?

Inflation refers to the rate at which the prices of goods and services rise over a given time period. Usually, it is considered a broad economic indicator, consisting of the overall increase in prices across various sectors and domains. The inflation rate can be measured by tracking changes in the cost of living that further reflect how much more expensive it has become for individuals to live and maintain their standard of living. 

The rate of inflation can be influenced by factors such as the supply and demand ratio, production costs, governmental policies, labor market, interest rates, and commodity prices. To manage inflation in India, RBI have employed various measures such as increasing the repo rate in the monetary policy that will help in reducing demand and lowering the overall inflation rate. 

Measured by the Consumer Price Index (CPI) that tracks the commodity prices, the rate of inflation shows how quickly the prices are rising across different months, and years and also can vary by country. 

Types of Inflation

How is Inflation Rate Calculated?

To calculate the rate of inflation, follow the given steps:

Step 1: Identify the Consumer Price Index (CPI) for the initial time period and label it ‘A’. 

Step 2: identify the CPI for the final time period and label it ‘B’.

Step 3: Calculate the difference between CPI values. Formula: (B-A). 

Step 4: Divide the difference by the initial CPI value (‘A’). Formula: (B-A)/A

Step 5: Multiply the decimal figure by 100 to get the value in percentage. 

Thus, the formula to calculate the rate of inflation is: 

(B-A)/A x 100

For example: You want to calculate the inflation rate for chocolates between July 2013 and July 2023. If the average price of chocolate was INR 10 in July 2013 and INR 30 in July 2023, the calculation would proceed as:

Initial time period: July 2013= Rs. 10 (mark it as ‘A’)

Final time period: July 2023= Rs. 30 (mark it as ‘B’)

Inflation rate= (B-A)/A x 100

= (30-10)/10 x 100

Inflation rate = 200%

Note: The Consumer Price Index (CPI), also known as retail inflation, is a tool used to calculate changes in the average price of goods and services that households purchase over a period of time. Used to measure inflation and show how the cost of living changes for consumers, CPI helps adjust wages, pensions, and government benefits to keep updated with changes in purchasing power. 

What is the Current Inflation Rate in India?

  • According to recent data from the Ministry of Statistics and Programme Implementation, India’s retail inflation (or CPI) rose to 5.08% in June 2024, increasing from 4.75% in May. 
  • The retail inflation rate in India is expected to stay below 5.0% for the rest of the year except September as projected in a recent research conducted by SBI. 
  • As per data from the National Statistics Office (NSO), India’s retail inflation rate was highest in January 2024 at 5.10%. It came down to 5.09% in February 2024 and 4.85% in March. In April 2024, retail inflation further dropped to 4.83%. However, it stayed within the acceptable range of 2-6% as accepted by the Reserve Bank of India (RBI).
  • Inflation rate was higher in rural areas. It was 5.34% higher as compared to urban areas at 4.78% as per February data.
  • Food inflation rose to 8.66% from 8.3% of the previous month. It has almost doubled as compared to the inflation rate of 4.63% in the same month in 2023. 
  • Wholesale Price Index (WPI) for April 2024 remained at 1.26% (provisional). The increase occurred due to higher prices of food, electricity, crude petroleum, natural gas, and manufactured goods. Compared to March 2024, WPI showed a 0.79% increase which further indicates a slight increase in wholesale prices. 
  • Below is the state-wise table depicting the inflation rate for June 2024. 

Note: The Wholesale Price Index (WPI) notes the changes in average prices of goods that are traded in bulk. It serves as a key inflation indicator for the production and distribution of raw materials, intermediate goods, and finished products.  Also, it provides insights into the price trends before they reach the retail level. It is generally used by policymakers, businesses, and analysts to monitor inflationary pressures and make corresponding decisions.

Inflation Rate in India For the Last 10 Years

How Inflation Can Be Controlled?

  • Reduce taxes on petrol, diesel, and critical raw materials to lower production costs and consumer prices.
  • Reduce duty imports- lower tariffs on essential items like crude edible oils to mitigate price increases.
  • Practice responsible spending to manage personal finances. 
  • RBI’s role in controlling inflation is to increase the repo rate, that is the rate of interest upon public-private banks for borrowing money from banks. An increase in repo rates leads to an increase in interest rates by banks on loans and deposit rates. 
  • Reduce unnecessary expenditures to lower demand in the economy.

Thus, in 2024, India’s inflation rate is seen as increasing due to various influencing factors such as an increase in food pricing, crude petroleum, natural gas, and mineral oils, and seasonal weather variation. Due to inflation, an individual has to endure various hardships including the increased cost of living, higher interest rates, and purchasing power of things for daily needs, directly impacting the livelihood of common people. Hence, management and control of inflation should be prioritized and appropriate measures should be taken.

FAQs

What is the current inflation rate in India?

Based on all-India Consumer Price Index (CPI), the year-on-year inflation rate was 5.08% in June 2024. For rural areas the inflation rate was 5.66% and for urban area it was 4.39%. These rates indicates the economic conditions as influenced by factors such as supply chain issues, rising production costs and variations in demands for goods and services.

Who determines the inflation rate in India?

The Government of India sets the inflation target every five years in collaboration with the Reserve Bank of India (RBI). The responsibility for controlling inflation through monetary policies rests with the RBI.

You May Also Like