Prices and Inflation | Economic Survey & Government Reports - UPSC PDF Download

 Page 1


CHAPTER
05
As economic activity started showing signs of picking-up in the second year of the pandemic, 
the global economy faced the fresh challenge of rising global inflation. COVID-19 related 
stimulus spending in major economies along with pent-up demand boosting consumer 
spending pushed inflation up in many advanced and emerging economies. The surge in 
energy, food, non-food commodities, and input prices, supply constraints, disruption of 
global supply chains, and rising freight costs across the globe stoked global inflation 
during the year . Crude oil prices also witnessed an upswing during the year on the back of 
increased demand from recovering economies and supply restrictions by the Organization 
of the Petroleum Exporting Countries and its allies (OPEC+).  
On the domestic front, the average headline Consumer Price Index-Combined (CPI-C) 
inflation in India moderated to 5.2 per cent in 2021-22 (April-December) from 6.6 per 
cent in the corresponding period of 2020-21 and was recorded at 5.6 per cent in December 
2021. The Consumer Price Index inflation remained range bound as food prices eased 
considerably due to the supply management response by the Government. Food inflation 
remained benign during the year at 2.9 per cent (April-December) as against 9.1 per 
cent in the corresponding period last year. In the case of vegetables, prices of onions and 
potatoes remained under control, though retail prices of tomatoes witnessed an uptick 
during September to November 2021 due to untimely rains in major producing states. 
However, with fresh arrivals in the market in December, retail prices of tomatoes too, 
are showing signs of easing. While seasonality plays a significant role in the case of 
vegetables, random shocks like untimely rains also have an impact on their availability 
and prices. A strong network of cold storage chains well supported by effective transport 
infrastructure is needed to stabilize the prices of such perishable commodities. Effective 
supply-side management kept prices of most essential commodities under control during 
the year. Proactive measures were taken to contain the price rise in pulses and edible 
oils that reported high inflation reflecting the impact of imported inflation in these 
commodities. Reduction in central excise and subsequent cuts in VAT by most States has 
also helped ease petrol and diesel prices.
Wholesale inflation based on Wholesale Price Index (WPI), after remaining very benign 
during the previous financial year on account of pandemic induced weakening of 
economic activity, record low global crude oil prices and weak demand, witnessed a sharp 
uptick, rising to 12.5 per cent during 2021-22 (April-December). This was attributable 
to the pick-up in economic activity, sharp increase in international prices of crude oil 
and other imported inputs, and high freight costs. The consequent divergence between 
Prices and Inflation
Page 2


CHAPTER
05
As economic activity started showing signs of picking-up in the second year of the pandemic, 
the global economy faced the fresh challenge of rising global inflation. COVID-19 related 
stimulus spending in major economies along with pent-up demand boosting consumer 
spending pushed inflation up in many advanced and emerging economies. The surge in 
energy, food, non-food commodities, and input prices, supply constraints, disruption of 
global supply chains, and rising freight costs across the globe stoked global inflation 
during the year . Crude oil prices also witnessed an upswing during the year on the back of 
increased demand from recovering economies and supply restrictions by the Organization 
of the Petroleum Exporting Countries and its allies (OPEC+).  
On the domestic front, the average headline Consumer Price Index-Combined (CPI-C) 
inflation in India moderated to 5.2 per cent in 2021-22 (April-December) from 6.6 per 
cent in the corresponding period of 2020-21 and was recorded at 5.6 per cent in December 
2021. The Consumer Price Index inflation remained range bound as food prices eased 
considerably due to the supply management response by the Government. Food inflation 
remained benign during the year at 2.9 per cent (April-December) as against 9.1 per 
cent in the corresponding period last year. In the case of vegetables, prices of onions and 
potatoes remained under control, though retail prices of tomatoes witnessed an uptick 
during September to November 2021 due to untimely rains in major producing states. 
However, with fresh arrivals in the market in December, retail prices of tomatoes too, 
are showing signs of easing. While seasonality plays a significant role in the case of 
vegetables, random shocks like untimely rains also have an impact on their availability 
and prices. A strong network of cold storage chains well supported by effective transport 
infrastructure is needed to stabilize the prices of such perishable commodities. Effective 
supply-side management kept prices of most essential commodities under control during 
the year. Proactive measures were taken to contain the price rise in pulses and edible 
oils that reported high inflation reflecting the impact of imported inflation in these 
commodities. Reduction in central excise and subsequent cuts in VAT by most States has 
also helped ease petrol and diesel prices.
Wholesale inflation based on Wholesale Price Index (WPI), after remaining very benign 
during the previous financial year on account of pandemic induced weakening of 
economic activity, record low global crude oil prices and weak demand, witnessed a sharp 
uptick, rising to 12.5 per cent during 2021-22 (April-December). This was attributable 
to the pick-up in economic activity, sharp increase in international prices of crude oil 
and other imported inputs, and high freight costs. The consequent divergence between 
Prices and Inflation
160 Economic Survey 2021-22
GLOBAL INFLATION
5.1 In 2021, inflation picked up globally as economic activity revived with opening-up of 
economies. COVID-19 related stimulus spending, mainly in the form of discretionary handouts 
to households in major economies, along with pent up demand fueling consumer spending, 
pushed inflation up in both advanced and emerging economies. In the advanced economies, 
inflation has increased from 0.7 per cent in 2020 to around 3.1 per cent in 2021 (Figure 1)  (IMF, 
2022). The surge in energy, food, non-food commodities, and input prices, supply constraints, 
disruption of global supply chains, and rising freight costs across the globe stoked global 
inflation during the year. Crude oil prices also witnessed an upswing during the year on the back 
of increased demand from recovering economies and supply cuts by the Organization of the 
Petroleum Exporting Countries and its allies (OPEC+). 
Figure 1: Consumer Price Inflation Rates 
3.1
5.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Inflation rate (per cent)
Advanced economies EMDEs
Source: World Economic Outlook, January 2022 Update, IMF
Note: The figure are annual averages.
Advanced Economies include 40 economies and Emerging Markets and Developing Economies (EMDEs) 
include 156 economies as per IMF classification
CPI-C and WPI inflation during the year remained a subject of debate. This divergence 
can be explained by factors such as variations due to base effect, difference in scope 
and coverage of the two indices, their price collections, items covered and difference in 
commodity weights. Further, WPI is more sensitive to cost-push inflation led by imported 
inputs. With the gradual waning of base effect in WPI, the divergence in CPI-C inflation 
and WPI inflation is also expected to narrow down.
Page 3


CHAPTER
05
As economic activity started showing signs of picking-up in the second year of the pandemic, 
the global economy faced the fresh challenge of rising global inflation. COVID-19 related 
stimulus spending in major economies along with pent-up demand boosting consumer 
spending pushed inflation up in many advanced and emerging economies. The surge in 
energy, food, non-food commodities, and input prices, supply constraints, disruption of 
global supply chains, and rising freight costs across the globe stoked global inflation 
during the year . Crude oil prices also witnessed an upswing during the year on the back of 
increased demand from recovering economies and supply restrictions by the Organization 
of the Petroleum Exporting Countries and its allies (OPEC+).  
On the domestic front, the average headline Consumer Price Index-Combined (CPI-C) 
inflation in India moderated to 5.2 per cent in 2021-22 (April-December) from 6.6 per 
cent in the corresponding period of 2020-21 and was recorded at 5.6 per cent in December 
2021. The Consumer Price Index inflation remained range bound as food prices eased 
considerably due to the supply management response by the Government. Food inflation 
remained benign during the year at 2.9 per cent (April-December) as against 9.1 per 
cent in the corresponding period last year. In the case of vegetables, prices of onions and 
potatoes remained under control, though retail prices of tomatoes witnessed an uptick 
during September to November 2021 due to untimely rains in major producing states. 
However, with fresh arrivals in the market in December, retail prices of tomatoes too, 
are showing signs of easing. While seasonality plays a significant role in the case of 
vegetables, random shocks like untimely rains also have an impact on their availability 
and prices. A strong network of cold storage chains well supported by effective transport 
infrastructure is needed to stabilize the prices of such perishable commodities. Effective 
supply-side management kept prices of most essential commodities under control during 
the year. Proactive measures were taken to contain the price rise in pulses and edible 
oils that reported high inflation reflecting the impact of imported inflation in these 
commodities. Reduction in central excise and subsequent cuts in VAT by most States has 
also helped ease petrol and diesel prices.
Wholesale inflation based on Wholesale Price Index (WPI), after remaining very benign 
during the previous financial year on account of pandemic induced weakening of 
economic activity, record low global crude oil prices and weak demand, witnessed a sharp 
uptick, rising to 12.5 per cent during 2021-22 (April-December). This was attributable 
to the pick-up in economic activity, sharp increase in international prices of crude oil 
and other imported inputs, and high freight costs. The consequent divergence between 
Prices and Inflation
160 Economic Survey 2021-22
GLOBAL INFLATION
5.1 In 2021, inflation picked up globally as economic activity revived with opening-up of 
economies. COVID-19 related stimulus spending, mainly in the form of discretionary handouts 
to households in major economies, along with pent up demand fueling consumer spending, 
pushed inflation up in both advanced and emerging economies. In the advanced economies, 
inflation has increased from 0.7 per cent in 2020 to around 3.1 per cent in 2021 (Figure 1)  (IMF, 
2022). The surge in energy, food, non-food commodities, and input prices, supply constraints, 
disruption of global supply chains, and rising freight costs across the globe stoked global 
inflation during the year. Crude oil prices also witnessed an upswing during the year on the back 
of increased demand from recovering economies and supply cuts by the Organization of the 
Petroleum Exporting Countries and its allies (OPEC+). 
Figure 1: Consumer Price Inflation Rates 
3.1
5.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Inflation rate (per cent)
Advanced economies EMDEs
Source: World Economic Outlook, January 2022 Update, IMF
Note: The figure are annual averages.
Advanced Economies include 40 economies and Emerging Markets and Developing Economies (EMDEs) 
include 156 economies as per IMF classification
CPI-C and WPI inflation during the year remained a subject of debate. This divergence 
can be explained by factors such as variations due to base effect, difference in scope 
and coverage of the two indices, their price collections, items covered and difference in 
commodity weights. Further, WPI is more sensitive to cost-push inflation led by imported 
inputs. With the gradual waning of base effect in WPI, the divergence in CPI-C inflation 
and WPI inflation is also expected to narrow down.
161 Prices and Inflation
5.2 However, in comparison to many Emerging Markets and Developing Economies (EMDEs) 
and advanced economies, consumer price inflation in India remained range bound in the recent 
months, touching 4.9 per cent in November 2021 and 5.6 per cent in December 2021, owing 
to the proactive steps taken by the Government for effective supply management. As against 
this, inflation in USA touched 7.0 per cent in December 2021, the highest since 1982, driven 
largely by second hand vehicles and energy. While in the UK it hit a nearly 30 years high 
of 5.4 per cent in December 2021 mainly on account of rising food prices. Among emerging 
markets, Brazil witnessed high and rising inflation during 2021 which touched 10.1 per cent in 
December 2021(Figure 2). Inflation in Turkey has been in double digits, reaching 36.1 per cent 
in December 2021. Argentina has witnessed inflation rates above 50 per cent during the last six 
months.
Figure 2: Consumer Price Inflation in select countries
7.0
10.1
5.6
5.4
0
2
4
6
8
10
12
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21
Inflation rate (yoy) (per cent)
US Brazil India UK
 Source: Organisation for Economic Co-operation and Development; Office for National Statistics, UK
DOMESTIC INFLATION
5.3 Retail inflation, as measured by Consumer Price Index-Combined (CPI-C) inflation, 
in India, which was slightly above 6 per cent in 2020-21 owing to supply chain disruptions 
caused by COVID-19 restrictions, lockdowns, and night curfews, moderated during the 
current financial year. Retail inflation during 2021-22 (April-December) stood at 5.2 per cent 
(Table 1).  Wholesale inflation, based on Wholesale Price Index (WPI), after remaining benign 
during the previous financial years, saw a sharp uptick during 2021-22 (April-December). A part 
of the observed rise in wholesale inflation could be attributed to the low base in the previous 
year. However, rising input costs and global commodity prices also contributed to the rise in 
wholesale prices.
Page 4


CHAPTER
05
As economic activity started showing signs of picking-up in the second year of the pandemic, 
the global economy faced the fresh challenge of rising global inflation. COVID-19 related 
stimulus spending in major economies along with pent-up demand boosting consumer 
spending pushed inflation up in many advanced and emerging economies. The surge in 
energy, food, non-food commodities, and input prices, supply constraints, disruption of 
global supply chains, and rising freight costs across the globe stoked global inflation 
during the year . Crude oil prices also witnessed an upswing during the year on the back of 
increased demand from recovering economies and supply restrictions by the Organization 
of the Petroleum Exporting Countries and its allies (OPEC+).  
On the domestic front, the average headline Consumer Price Index-Combined (CPI-C) 
inflation in India moderated to 5.2 per cent in 2021-22 (April-December) from 6.6 per 
cent in the corresponding period of 2020-21 and was recorded at 5.6 per cent in December 
2021. The Consumer Price Index inflation remained range bound as food prices eased 
considerably due to the supply management response by the Government. Food inflation 
remained benign during the year at 2.9 per cent (April-December) as against 9.1 per 
cent in the corresponding period last year. In the case of vegetables, prices of onions and 
potatoes remained under control, though retail prices of tomatoes witnessed an uptick 
during September to November 2021 due to untimely rains in major producing states. 
However, with fresh arrivals in the market in December, retail prices of tomatoes too, 
are showing signs of easing. While seasonality plays a significant role in the case of 
vegetables, random shocks like untimely rains also have an impact on their availability 
and prices. A strong network of cold storage chains well supported by effective transport 
infrastructure is needed to stabilize the prices of such perishable commodities. Effective 
supply-side management kept prices of most essential commodities under control during 
the year. Proactive measures were taken to contain the price rise in pulses and edible 
oils that reported high inflation reflecting the impact of imported inflation in these 
commodities. Reduction in central excise and subsequent cuts in VAT by most States has 
also helped ease petrol and diesel prices.
Wholesale inflation based on Wholesale Price Index (WPI), after remaining very benign 
during the previous financial year on account of pandemic induced weakening of 
economic activity, record low global crude oil prices and weak demand, witnessed a sharp 
uptick, rising to 12.5 per cent during 2021-22 (April-December). This was attributable 
to the pick-up in economic activity, sharp increase in international prices of crude oil 
and other imported inputs, and high freight costs. The consequent divergence between 
Prices and Inflation
160 Economic Survey 2021-22
GLOBAL INFLATION
5.1 In 2021, inflation picked up globally as economic activity revived with opening-up of 
economies. COVID-19 related stimulus spending, mainly in the form of discretionary handouts 
to households in major economies, along with pent up demand fueling consumer spending, 
pushed inflation up in both advanced and emerging economies. In the advanced economies, 
inflation has increased from 0.7 per cent in 2020 to around 3.1 per cent in 2021 (Figure 1)  (IMF, 
2022). The surge in energy, food, non-food commodities, and input prices, supply constraints, 
disruption of global supply chains, and rising freight costs across the globe stoked global 
inflation during the year. Crude oil prices also witnessed an upswing during the year on the back 
of increased demand from recovering economies and supply cuts by the Organization of the 
Petroleum Exporting Countries and its allies (OPEC+). 
Figure 1: Consumer Price Inflation Rates 
3.1
5.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Inflation rate (per cent)
Advanced economies EMDEs
Source: World Economic Outlook, January 2022 Update, IMF
Note: The figure are annual averages.
Advanced Economies include 40 economies and Emerging Markets and Developing Economies (EMDEs) 
include 156 economies as per IMF classification
CPI-C and WPI inflation during the year remained a subject of debate. This divergence 
can be explained by factors such as variations due to base effect, difference in scope 
and coverage of the two indices, their price collections, items covered and difference in 
commodity weights. Further, WPI is more sensitive to cost-push inflation led by imported 
inputs. With the gradual waning of base effect in WPI, the divergence in CPI-C inflation 
and WPI inflation is also expected to narrow down.
161 Prices and Inflation
5.2 However, in comparison to many Emerging Markets and Developing Economies (EMDEs) 
and advanced economies, consumer price inflation in India remained range bound in the recent 
months, touching 4.9 per cent in November 2021 and 5.6 per cent in December 2021, owing 
to the proactive steps taken by the Government for effective supply management. As against 
this, inflation in USA touched 7.0 per cent in December 2021, the highest since 1982, driven 
largely by second hand vehicles and energy. While in the UK it hit a nearly 30 years high 
of 5.4 per cent in December 2021 mainly on account of rising food prices. Among emerging 
markets, Brazil witnessed high and rising inflation during 2021 which touched 10.1 per cent in 
December 2021(Figure 2). Inflation in Turkey has been in double digits, reaching 36.1 per cent 
in December 2021. Argentina has witnessed inflation rates above 50 per cent during the last six 
months.
Figure 2: Consumer Price Inflation in select countries
7.0
10.1
5.6
5.4
0
2
4
6
8
10
12
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21
Inflation rate (yoy) (per cent)
US Brazil India UK
 Source: Organisation for Economic Co-operation and Development; Office for National Statistics, UK
DOMESTIC INFLATION
5.3 Retail inflation, as measured by Consumer Price Index-Combined (CPI-C) inflation, 
in India, which was slightly above 6 per cent in 2020-21 owing to supply chain disruptions 
caused by COVID-19 restrictions, lockdowns, and night curfews, moderated during the 
current financial year. Retail inflation during 2021-22 (April-December) stood at 5.2 per cent 
(Table 1).  Wholesale inflation, based on Wholesale Price Index (WPI), after remaining benign 
during the previous financial years, saw a sharp uptick during 2021-22 (April-December). A part 
of the observed rise in wholesale inflation could be attributed to the low base in the previous 
year. However, rising input costs and global commodity prices also contributed to the rise in 
wholesale prices.
162 Economic Survey 2021-22
Table 1. General inflation based on different price indices (in per cent)
Indices 2015-
16
2016-
17
2017-
18
2018-
19
2019-
20
2020-
21
2020-
21^
2021 
-22*
WPI -3.7 1.7 3.0 4.3 1.7 1.3 0.0 12.5
CPI - C 
(Headline 
Inflation)
4.9 4.5 3.6 3.4 4.8 6.2 6.6 5.2
CPI – IW
#
5.6 4.2 2.9 5.6 7.3 5.2 5.2 5.0
CPI - AL 4.4 4.2 2.2 2.1 8.0 5.5 7.0 3.2
CPI - RL 4.6 4.2 2.3 2.2 7.7 5.5 6.8 3.5
Source: Office of the Economic Adviser, Department for Promotion of Industry, and Internal Trade (DPIIT) for 
WPI, National Statistical Office (NSO) for CPI-C and Labour Bureau for CPI-IW, CPI-AL and CPI-RL. 
Notes: #CPI-IW inflation for 2020-21 onwards is based on new series 2016=100; (P) - Provisional; C stands 
for Combined, IW stands for Industrial Workers, AL stands for Agricultural Labourers and RL stands for Rural 
Labourers. *2021-22 (April to December) and CPI-IW, CPI-AL, RL (April to November)
^2020-21 (April to December) and CPI-IW, CPI-AL, RL (April to November)
CURRENT TRENDS IN INFLATION AND ITS DRIVERS
Recent Trends in Retail Inflation
5.4 The average retail inflation which was 4.8 per cent in 2019-20, inched up to 6.2 per cent 
in 2020-21, on account of COVID-19 related supply chain disruptions and stalled economic 
activity due to lockdown. Since July 2021, retail inflation is well within the tolerance band of 
targeted limit of 4 per cent +/- 2 percentage points set by the Government for the period April 
1, 2021- March 31, 2026 (Table 2). Average retail inflation in 2021-22 (April-December) has 
declined to 5.2 per cent as against 6.6 per cent during April-December 2020-21. 
5.5 In 2021-22, the decline in retail inflation was led by easing of food inflation. Food inflation, 
as measured by the Consumer Food Price Index (CFPI), averaged at a low of 2.9 per cent in 
2021-22 (April to December), as against 9.1 per cent in the corresponding period last year. Food 
inflation declined between July and September 2021. Though edging up, it increased to 4.0 per 
cent in December 2021. 
5.6 During the current financial year, retail core inflation (inflation excluding ‘food and 
beverages’ and ‘fuel and light’ – the transitory components of the index) has shown a rising 
trend. Average core inflation for the period April-December 2021 stood at 5.9 per cent as against 
5.4 per cent in corresponding period last year, and remained below 6 per cent during most 
months. (Figure 3). 
Page 5


CHAPTER
05
As economic activity started showing signs of picking-up in the second year of the pandemic, 
the global economy faced the fresh challenge of rising global inflation. COVID-19 related 
stimulus spending in major economies along with pent-up demand boosting consumer 
spending pushed inflation up in many advanced and emerging economies. The surge in 
energy, food, non-food commodities, and input prices, supply constraints, disruption of 
global supply chains, and rising freight costs across the globe stoked global inflation 
during the year . Crude oil prices also witnessed an upswing during the year on the back of 
increased demand from recovering economies and supply restrictions by the Organization 
of the Petroleum Exporting Countries and its allies (OPEC+).  
On the domestic front, the average headline Consumer Price Index-Combined (CPI-C) 
inflation in India moderated to 5.2 per cent in 2021-22 (April-December) from 6.6 per 
cent in the corresponding period of 2020-21 and was recorded at 5.6 per cent in December 
2021. The Consumer Price Index inflation remained range bound as food prices eased 
considerably due to the supply management response by the Government. Food inflation 
remained benign during the year at 2.9 per cent (April-December) as against 9.1 per 
cent in the corresponding period last year. In the case of vegetables, prices of onions and 
potatoes remained under control, though retail prices of tomatoes witnessed an uptick 
during September to November 2021 due to untimely rains in major producing states. 
However, with fresh arrivals in the market in December, retail prices of tomatoes too, 
are showing signs of easing. While seasonality plays a significant role in the case of 
vegetables, random shocks like untimely rains also have an impact on their availability 
and prices. A strong network of cold storage chains well supported by effective transport 
infrastructure is needed to stabilize the prices of such perishable commodities. Effective 
supply-side management kept prices of most essential commodities under control during 
the year. Proactive measures were taken to contain the price rise in pulses and edible 
oils that reported high inflation reflecting the impact of imported inflation in these 
commodities. Reduction in central excise and subsequent cuts in VAT by most States has 
also helped ease petrol and diesel prices.
Wholesale inflation based on Wholesale Price Index (WPI), after remaining very benign 
during the previous financial year on account of pandemic induced weakening of 
economic activity, record low global crude oil prices and weak demand, witnessed a sharp 
uptick, rising to 12.5 per cent during 2021-22 (April-December). This was attributable 
to the pick-up in economic activity, sharp increase in international prices of crude oil 
and other imported inputs, and high freight costs. The consequent divergence between 
Prices and Inflation
160 Economic Survey 2021-22
GLOBAL INFLATION
5.1 In 2021, inflation picked up globally as economic activity revived with opening-up of 
economies. COVID-19 related stimulus spending, mainly in the form of discretionary handouts 
to households in major economies, along with pent up demand fueling consumer spending, 
pushed inflation up in both advanced and emerging economies. In the advanced economies, 
inflation has increased from 0.7 per cent in 2020 to around 3.1 per cent in 2021 (Figure 1)  (IMF, 
2022). The surge in energy, food, non-food commodities, and input prices, supply constraints, 
disruption of global supply chains, and rising freight costs across the globe stoked global 
inflation during the year. Crude oil prices also witnessed an upswing during the year on the back 
of increased demand from recovering economies and supply cuts by the Organization of the 
Petroleum Exporting Countries and its allies (OPEC+). 
Figure 1: Consumer Price Inflation Rates 
3.1
5.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Inflation rate (per cent)
Advanced economies EMDEs
Source: World Economic Outlook, January 2022 Update, IMF
Note: The figure are annual averages.
Advanced Economies include 40 economies and Emerging Markets and Developing Economies (EMDEs) 
include 156 economies as per IMF classification
CPI-C and WPI inflation during the year remained a subject of debate. This divergence 
can be explained by factors such as variations due to base effect, difference in scope 
and coverage of the two indices, their price collections, items covered and difference in 
commodity weights. Further, WPI is more sensitive to cost-push inflation led by imported 
inputs. With the gradual waning of base effect in WPI, the divergence in CPI-C inflation 
and WPI inflation is also expected to narrow down.
161 Prices and Inflation
5.2 However, in comparison to many Emerging Markets and Developing Economies (EMDEs) 
and advanced economies, consumer price inflation in India remained range bound in the recent 
months, touching 4.9 per cent in November 2021 and 5.6 per cent in December 2021, owing 
to the proactive steps taken by the Government for effective supply management. As against 
this, inflation in USA touched 7.0 per cent in December 2021, the highest since 1982, driven 
largely by second hand vehicles and energy. While in the UK it hit a nearly 30 years high 
of 5.4 per cent in December 2021 mainly on account of rising food prices. Among emerging 
markets, Brazil witnessed high and rising inflation during 2021 which touched 10.1 per cent in 
December 2021(Figure 2). Inflation in Turkey has been in double digits, reaching 36.1 per cent 
in December 2021. Argentina has witnessed inflation rates above 50 per cent during the last six 
months.
Figure 2: Consumer Price Inflation in select countries
7.0
10.1
5.6
5.4
0
2
4
6
8
10
12
Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21
Inflation rate (yoy) (per cent)
US Brazil India UK
 Source: Organisation for Economic Co-operation and Development; Office for National Statistics, UK
DOMESTIC INFLATION
5.3 Retail inflation, as measured by Consumer Price Index-Combined (CPI-C) inflation, 
in India, which was slightly above 6 per cent in 2020-21 owing to supply chain disruptions 
caused by COVID-19 restrictions, lockdowns, and night curfews, moderated during the 
current financial year. Retail inflation during 2021-22 (April-December) stood at 5.2 per cent 
(Table 1).  Wholesale inflation, based on Wholesale Price Index (WPI), after remaining benign 
during the previous financial years, saw a sharp uptick during 2021-22 (April-December). A part 
of the observed rise in wholesale inflation could be attributed to the low base in the previous 
year. However, rising input costs and global commodity prices also contributed to the rise in 
wholesale prices.
162 Economic Survey 2021-22
Table 1. General inflation based on different price indices (in per cent)
Indices 2015-
16
2016-
17
2017-
18
2018-
19
2019-
20
2020-
21
2020-
21^
2021 
-22*
WPI -3.7 1.7 3.0 4.3 1.7 1.3 0.0 12.5
CPI - C 
(Headline 
Inflation)
4.9 4.5 3.6 3.4 4.8 6.2 6.6 5.2
CPI – IW
#
5.6 4.2 2.9 5.6 7.3 5.2 5.2 5.0
CPI - AL 4.4 4.2 2.2 2.1 8.0 5.5 7.0 3.2
CPI - RL 4.6 4.2 2.3 2.2 7.7 5.5 6.8 3.5
Source: Office of the Economic Adviser, Department for Promotion of Industry, and Internal Trade (DPIIT) for 
WPI, National Statistical Office (NSO) for CPI-C and Labour Bureau for CPI-IW, CPI-AL and CPI-RL. 
Notes: #CPI-IW inflation for 2020-21 onwards is based on new series 2016=100; (P) - Provisional; C stands 
for Combined, IW stands for Industrial Workers, AL stands for Agricultural Labourers and RL stands for Rural 
Labourers. *2021-22 (April to December) and CPI-IW, CPI-AL, RL (April to November)
^2020-21 (April to December) and CPI-IW, CPI-AL, RL (April to November)
CURRENT TRENDS IN INFLATION AND ITS DRIVERS
Recent Trends in Retail Inflation
5.4 The average retail inflation which was 4.8 per cent in 2019-20, inched up to 6.2 per cent 
in 2020-21, on account of COVID-19 related supply chain disruptions and stalled economic 
activity due to lockdown. Since July 2021, retail inflation is well within the tolerance band of 
targeted limit of 4 per cent +/- 2 percentage points set by the Government for the period April 
1, 2021- March 31, 2026 (Table 2). Average retail inflation in 2021-22 (April-December) has 
declined to 5.2 per cent as against 6.6 per cent during April-December 2020-21. 
5.5 In 2021-22, the decline in retail inflation was led by easing of food inflation. Food inflation, 
as measured by the Consumer Food Price Index (CFPI), averaged at a low of 2.9 per cent in 
2021-22 (April to December), as against 9.1 per cent in the corresponding period last year. Food 
inflation declined between July and September 2021. Though edging up, it increased to 4.0 per 
cent in December 2021. 
5.6 During the current financial year, retail core inflation (inflation excluding ‘food and 
beverages’ and ‘fuel and light’ – the transitory components of the index) has shown a rising 
trend. Average core inflation for the period April-December 2021 stood at 5.9 per cent as against 
5.4 per cent in corresponding period last year, and remained below 6 per cent during most 
months. (Figure 3). 
163 Prices and Inflation
Table 2: Inflation in selected groups of CPI-Base 2012 (in per cent)
Description Weights 2019-
20
2020-
21
2020-
21^
2021-
22#
Apr-
21
May-
21
Jun-
21
Jul-
21
Aug-
21
Sep-
21
Oct-
21
Nov-
21 
Dec-
21(P)
All Groups 100 4.8 6.2 6.6 5.2 4.2 6.3 6.3 5.6 5.3 4.3 4.5 4.9 5.6
CFPI* 39.1 6.7 7.7 9.1 2.9 2.0 5.0 5.1 4.0 3.1 0.7 0.8 1.9 4.0
Food & 
beverages
45.9 6.0 7.3 8.4 3.5 2.6 5.2 5.6 4.5 3.7 1.6 1.8 2.6 4.5
Cereals & 
products
9.7 2.8 3.8 5.2 -0.6 -3.0 -1.4 -1.9 -1.7 -1.4 -0.6 0.4 1.5 2.6
Meat & fish 3.6 9.3 15.4 16.3 8.0 16.7 9.1 4.8 8.3 9.2 8.0 7.1 5.5 4.6
Egg 0.4 4.5 12.9 13.3 9.3 10.6 15.2 19.4 20.8 16.3 7.1 -1.4 -1.3 1.5
Milk & 
products
6.6 2.9 5.4 6.4 2.4 -0.1 0.6 1.9 2.7 2.9 3.1 3.2 3.4 3.8
Oils & fats 3.6 2.9 16.0 14.0 30.9 25.9 30.9 34.8 32.5 33.1 34.2 33.6 29.7 24.3
Fruits 2.9 0.7 2.6 1.4 7.4 9.7 11.8 11.8 9.0 6.7 3.6 4.9 6.0 3.5
Vegetables 6.0 21.3 5.8 11.0 -11.3 -14.5 -1.9 -0.7 -7.8 -11.7 -22.4 -19.4 -13.6 -3.0
Pulses & 
products
2.4 9.9 16.4 17.6 7.1 7.5 9.4 10.0 9.0 8.8 8.7 5.4 3.2 2.4
Sugar & 
confectionery
1.4 0.8 2.5 3.5 1.3 -6.0 -1.5 0.8 -0.5 -0.6 3.0 5.4 6.2 5.6
Fuel & Light 6.8 1.3 2.7 2.3 12.2 8.0 11.9 12.6 12.4 12.9 13.6 14.3 13.3 11.0
CPI excl. 
food and 
fuel group 
(Core)
47.3 4.0 5.5 5.4 5.9 5.3 6.6 6.1 5.8 5.8 5.9 5.9 6.2 6.0
Source: NSO                             P: Provisional             * Consumer Food Price Index  
^April to December 2020  # April to December 2021
Figure 3: Trends in CPI-C Headline, Core and Food inflation
-4
-2
0
2
4
6
8
10
12
14
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Jun-21
Dec-21
Inflation rate (yoy) (per cent)
Headline Core Food
 Source: NSO, MoSPI
5.7 Conventionally, core inflation is calculated by excluding ‘food and beverages’ and ‘fuel 
and light’
1
 groups from overall inflation. While in CPI-C, major fuel items such as ‘petrol for 
1.    ‘Fuel and light’ consist mainly of items used by households to meet their domestic fuel needs excluding that for 
conveyance such as electricity, LPG, Kerosene and other fuels used for cooking. On the other hand, petrol and 
diesel used for vehicles is included in the ‘transport and communication’ sub-group of the miscellaneous group.