Economic Survey 2018 Notes on Inflation For UPSC Prelims 2018 -Inflation in the country continued to moderate during 2017-18. CPI based headline inflation averaged 3.3 per cent during April-December 2017-18, the lowest in the last six financial years.

The significant reduction in food inflation, particularly of pulses and vegetables, moderated the general inflation.The average food inflation fell to 1.2 per cent during April December 2017-18.

Economic Survey 2018 Notes on Inflation For UPSC Prelims 2018

Core inflation too declined during this period. Many States witnessed reduction in inflation across rural as well as urban areas during the year.Economic Survey 2018 Notes on Inflation For UPSC Prelims 2018

Economic Survey 2018 Notes on Inflation For UPSC Prelims 2018
  • The economy witnessed a gradual transition from a period of high and variable inflation to more stable prices in the last four years.
  • Headline inflation measured by the Consumer Price Index (CPI) has remained under control for the fourth successive year.
  • Food inflation measured by the Consumer Food Price Index (CFPI) declined to a low of 1.2 per cent during the FY 2017-18 (April-December).
  • Headline – The Consumer Price Index (CPI) based headline inflation averaged to 3.3% during 2017-18.
  • Many states have also witnessed a sharp fall in CPI inflation during 2017-18.
  • Trend -This is notably the lowest in the last six financial years.
  • It has been below 4% for twelve straight months, from November, 2016 to October, 2017.
  • It indicates a gradual transition from a period of high and variable inflation in the last four years to more stable prices.
  • Food – The CPI food inflation averaged around 1% during April-December in the current financial year.
  • This has been possible due to Good agricultural production coupled with regular price monitoring by the Government.
  • However, the recent rise in food inflation is mainly due to factors driving prices of vegetables and fruits.
  • The rise in food inflation in recent months is mainly due to factors driving prices of vegetables and fruits.
  • Though decline in food inflation is broad-based, major drivers are meat & fish, oil & fats, spices and pulses &
  • Factors – The decline in inflation was broad-based across major commodity groups except Housing and Fuel & Light.
  • In rural areas food was the main driver of CPI inflation.
  • In urban areas, housing sector contributed the most.

Main Drivers of Inflation in India – Weightage of All Items in Inflation

 Housing Price Index 

  • The Housing Price Indices (HPIs) are a broad measure of movement of residential property prices observed within a geographic boundary.
  • The first official housing price index for the country named ‘NHB RESIDEX’ was launched in July,
    2007 by the National Housing Bank (NHB).
  • Overtime, the base year has been revised to FY 2012-13 to ensure capturing the latest information and accurately reflect the current economic situation in the country.
  • Currently, National Housing Bank is publishing NHB RESIDEX for 50 cities on quarterly basis with FY 2012-13 as base year.
  • Among 50 cities covered are 18 State/UT capitals and 37 Smart Cities.
  • NHB is not computing the composite all India housing price index as of now.
  • Using population proportion as weights, an all India index as weighted average of city indices has been computed in-house

 EFFORTS TO CONTAIN INFLATION -Economic Survey 2018 Notes on Inflation For UPSC Prelims 2018

  •  Advisories are being issued, as and when required, to State Governments to take strict action against hoarding & black marketing and effectively enforce the Essential Commodities Act, 1955 & the Prevention
    of Black-marketing and Maintenance of Supplies of Essential Commodities Act, 1980 for commodities in short supply.
  • Regular High level Review Meetings on prices .
  • Higher MSP has been announced so as to incentivize production and thereby enhance availability of food items which may help moderate prices.
  • A scheme titled Price Stabilization Fund (PSF) is being implemented to control price volatility of agricultural commodities like pulses, onions, etc.
  • Government approved enhancement in buffer stock of pulses from 1.5 lakh MT to 20 Lakh MT to enable effective market intervention for moderation of retail prices.
  • Government has imposed stock holding limits on stockist/dealers of sugar till April, 2018.
  • Government imposed 20% duty on export of sugar for promoting availability and moderating price rise.
  • Permitted import of 5 lakh tonnes of raw sugar at zero duty; subsequently, import of additional 3 lakh tonnes was allowed at 25% duty.
  • Export of all varieties of onion will be allowed only on letter of credit subject to a minimum export price (MEP) of $ 850 per MT till 31st December, 2017.
  • States/UTs have been advised to impose stock limit on onions. States were requested to indicate their requirement of onions so that import of requisite quantity may be undertaken to improve availability and help moderate the prevailing high prices.

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