Retail inflation increased in August: Inflation reached 7% due to increase in the prices of pulses, rice and wheat, it was 6.7% in July

Retail inflation rose to 7% in August after three months of decline. It was 6.7% in July. It was 5.30% a year ago i.e. in August 2021. The Consumer Price Index (CPI) based retail inflation data was released on Monday.

Inflation has increased due to increase in the prices of food items, especially pulses, rice, wheat and vegetables. Food inflation rose to 7.62% in August from 6.69% in July. It was 7.75% in June. It was 7.97% in May and 8.38% in April.

Retail inflation has remained above the RBI's upper limit of 6% for 8 consecutive months. Retail inflation was recorded at 6.01% in January 2022, 6.07% in February, 6.95% in March, 7.79% in April, 7.04% in May and 7.01% in June.

Worrying rise in inflation rate

Vivek Rathi, Research Director, Knight Frank India said, "Despite the fall in crude oil prices, the level of inflation in the economy remains high. Rising food prices and pressure on the Indian currency are a cause for concern. Inflation figures will decide the direction of the upcoming monetary policy. So far, in the last 5 months, RBI has raised interest rates three times to deal with inflation.

How does inflation affect?

Inflation is directly related to purchasing power. For example, if the inflation rate is 7%, then the value of Rs 100 earned would be just Rs 93. Therefore, investing should be done keeping in view the inflation. Otherwise the value of your money will be reduced.

How does inflation increase or decrease?

The rise and fall of inflation depends on the demand and supply of the product. If people have more money, they will buy more things. By buying more things, the demand for things will increase and if there is no supply according to the demand, the price of these things will increase.

In this way the market becomes vulnerable to inflation. Simply put, excessive flow of money in the market or shortfall of things causes inflation. On the other hand, if demand is low and supply is high, inflation will be low.

How does RBI control inflation?

To reduce inflation, the flow of money in the market (liquidity) is reduced. For this, the Reserve Bank of India (RBI) increases the repo rate. Concerned about rising inflation, RBI recently increased the repo rate by 0.50%. With this the repo rate has increased from 4.90% to 5.40%.