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Decoding Rural Retail Inflation: Causes and Consequences



  Nov 22, 2023

Rural Retail Inflation in India



What is retail inflation?

Retail inflation refers to the increase in the price of goods and services sold directly to consumers. It is measured by tracking price changes across a standard set of consumer goods and services over time.

Why has rural retail inflation been higher than urban in recent times?

Rural retail inflation has been higher than urban in 18 of the past 22 months primarily due to factors such as food price volatility, the high market penetration of processed foods, and supply-side constraints.

What are the main drivers of rural inflation?

The main drivers of rural inflation include food prices, particularly cereals, and the cost of services, with food products having a significant weight in the rural inflation basket.

How does the government measure retail inflation?

The government measures retail inflation using the Consumer Price Index (CPI), which captures changes in the price level of a market basket of consumer goods and services.

What impact does high rural inflation have on the economy?

High rural inflation can reduce the purchasing power of rural consumers, potentially slow down economic growth, and contribute to broader economic disparities between rural and urban areas.


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