Inflation

It is the rate at which prices have increased over a specific time frame. All of the Consumer Price Index’s volatile price components, like food and energy, are included in headline inflation. In order to eliminate short-term volatility and give a more accurate picture of long-term inflation patterns, core inflation does not include food and energy prices. Since core inflation is unaffected by transient price shocks, it is seen to be a more reliable indicator of underlying inflation trends. The Consumer Price Index combined, which monitors changes in the costs of a variety of household-consumed goods and services, is used to calculate retail inflation in India. The CPI is a composite index that takes into account changes in prices in both urban and rural regions. Under the flexible inflation targeting framework, the RBI has established an inflation target of 4% with a tolerance band of +/-2%. This goal can be achieved in the medium term.