Rural Inflation Trends: Key Insights on CPI Data

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Source: CMIE Economic Outlook, 1 Finance Research

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What does the Consumer Price Index Miscellaneous - Rural data represent?

This data measures the Year-on-Year (YoY) percentage change in the prices of miscellaneous items in the rural segment (a total of 114 items), comprising 27.26% of the Consumer Price Index (CPI) basket.
Household goods and services, health, transport and communication, recreation and amusement, education, personal care and effects are the broad subgroups covered under miscellaneous category, collectively representing most of the services related inflation levels.

Inflation in Miscellaneous Consumer Price Index (CPI) - rural is helpful to track the changing expenses on medicines, transportation, telecommunications, etc. on a monthly or annual basis for the rural population.
Changing inflation impacts the cost of living and purchasing power of the people, which also indicates the demand conditions and the spending power in the rural economy.

Inflation is measured by the Year-on-Year (YoY) percentage change in the level of the index. An increase in the index indicates inflation (rising prices) compared to previous year, while a decrease in the index suggests deflation (falling prices). A slowdown in the inflation rate over the month suggests disinflation.
Since 2016, RBI has adopted a flexible inflation targeting monetary policy framework which notifies 4% CPI inflation as the target, with the upper tolerance limit of 6% and the lower tolerance limit of 2%. Although there are no such targets for miscellaneous category, when interpreting rural CPI inflation in the miscellaneous category, one should consider how the trend aligns with the RBI's overall inflation target.