Q. With reference to retail inflation, consider the following statements:
1.It refers to the prices faced by consumers, and not the ones prevailing in the wholesale market.
2.The RBI targets retail inflation rate to maintain price stability.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C
Notes:

Both statements are correct.

  • Retail inflation essentially refers to the rate at which the general price level went up in a particular month (April in the current instance) over what it was in the same month a year ago.
    • The change is expressed as a percentage.
    • Retail inflation also refers to the prices faced by consumers, and not the ones prevailing in the wholesale market.
  • The retail inflation level is the most important measure of inflation in India because it is this inflation rate that India’s central Bank, the RBI, targets to maintain price stability. According to the law, the RBI is supposed to keep overall retail inflation between 2% and 6%.

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