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Inflation
Why is it in the news?
- As per the government data, Retail inflation spiked to a seven-month high of 3.05% in May.
- The spike is mainly due to costlier food items.
More in the news
- The consumer price index (CPI) based retail inflation for April was revised marginally upwards to 2.99% from the earlier estimate of 2.92%.
- Retail inflation stood at 4.87 per cent in May 2018.
- The previous high was in October 2018, when the retail inflation print came in at 3.38 per cent.
- Within the index, inflation in the ‘food and beverages’ segment accelerated to 2.03% from 1.38% over the same period.
- The fuel and light segment, however, saw inflation easing somewhat to 2.48% in May from 2.56% in the previous month.
- Retail inflation is a crucial data point, keenly watched by the Reserve Bank while deciding its monetary policy.
Concept
- Inflation is defined as a sustained increase in the general level of prices for goods and services in a county.
- Demand-Pull Inflation– Inflation is caused by the overall increase in demand for goods and services, which bids up their prices.
- This usually occurs in rapidly growing economies. This theory is often promoted by the Keynesian school of economics.
- Cost-Push Inflation– Inflation is caused when companies' costs of production go up. When this happens, they need to increase prices to maintain their profit margins.
Source
The Hindu.