Context: Data released by the National Statistical Office (NSO) shows that retail inflation slipped to near six-year low of 3.16% in April 2025, primarily due to moderation in prices of food items including vegetables, pulses, cereals, meat and fish.
Relevance of the Topic:Prelims: Key facts about Retail Inflation; Consumer Price Index
Retail Inflation
- Retail inflation reflects the cost of everyday goods and services bought for consumption purposes by households. It is measured by the Consumer Price Index (CPI).
- Retail inflation in India fell to a remarkable 3.34% in March 2025, the lowest since FY19.
- Under the inflation-targeting regime (2016), the Reserve Bank of India has an inflation target of 4% (with a leeway of 2% points on either side).
What is the Consumer Price Index (CPI)?
- CPI is an economic indicator that measures inflation at retail level (changes in the level of retail prices over time).
- It reflects how much households need to spend on a fixed basket of goods and services they typically consume, such as food, clothing, housing, and fuel.
- Compiled by: National Statistical Office (NSO), under the Ministry of Statistics and Programme Implementation.
- Calculated using: base year 2012
- CPI is a key benchmark for targeting inflation, monitoring price stability, and guiding monetary policy decisions by the Reserve Bank of India. It also serves as a deflator in the National Accounts to measure real economic growth.
Key government interventions to help lower Retail Inflation
The government’s strategic interventions have been pivotal in achieving this outcome. Key measures include:
- Bolstering buffer stocks of essential food items, and releasing them periodically in open markets.
- Subsidised retail sales of staples like rice, wheat flour, pulses, and onions.
- Simplified import duties on critical food items.
- Stricter stock limits to prevent hoarding.
- Reduced GST rates on essentials have further eased price pressures.
- Targeted subsidies, such as LPG support under Pradhan Mantri Ujjwala Yojana and the Pradhan Mantri Garib Kalyan Anna Yojana.
With inflation now at its lowest since 2018–19, India has reinforced macroeconomic stability and created an enabling environment for sustainable growth. Easing inflation could raise domestic consumption and India’s sluggish industrial production.
However, the steep fall in food prices can lower farmer incomes and directly impact rural consumption demand. The government must take measures to improve farmers’ income.