Retail inflation at 7 month low as food prices decline

Context

India’s retail inflation dipped to a seven-month low of 3.6% as food prices eased in February 2025, led by vegetables, pulses, and eggs. The annual change in consumer prices was 4.26% in January 2025.

The increase in the Consumer Price Index (CPI), which measures the retail prices, has slowed for the fourth consecutive month and is now lower than the Reserve Bank of India’s (RBI) target inflation of 4%. This increases the likelihood of another 0.25% repo rate cut by the RBI next month, say economists.

What is the Wholesale Price Index?

It measures the changes in the prices of goods sold and traded in bulk by wholesale businesses to other businesses.

Published by the Office of Economic Adviser, Ministry of Commerce and Industry.

Major criticism for this index is that the general public does not buy products at wholesale price.

The base year of All-India WPI has been revised to 2011-12

What is the Consumer Price Index?

It measures price changes from the perspective of a retail buyer. It is released by the National Statistical Office (NSO).

The CPI calculates the difference in the price of goods and services such as food, medical care, education, electronics etc, which Indian consumers buy for use.

The CPI has several sub-groups including food and beverages, fuel and light, housing and clothing, bedding and footwear.

Base Year for CPI is 2012.

The Monetary Policy Committee (MPC) uses CPI data to control inflation. In April 2014, the Reserve Bank of India (RBI) had adopted the CPI as its key measure of inflation instead of WPI

Four types of CPI are as follows:

1CPI for Industrial Workers (IW).

2CPI for Agricultural Labourer (AL).

3CPI for Rural Labourer (RL).

4CPI (Rural/Urban/Combined).

Of these, the first three are compiled by the Labour Bureau in the Ministry of Labour and Employment. Fourth is compiled by the NSO in the Ministry of Statistics and Programme Implementation.

What is the difference between CPI and WPI?

WPI tracks inflation at the producer level and CPI captures changes in prices levels at the consumer level.

WPI does not capture changes in the prices of services, which CPI does.

In WPI, more weightage is given to manufactured goods, while in CPI, more weightage is given to food items