Description

Context

Retail inflation in India increased to an eight-month high of 6.07 percent in February, up from 6.01 percent in January, with rural India suffering a steeper price rise of 6.38 percent. In reality, the inflation rate for urban consumers declined from 5.91 percent in January to 5.75 percent in February.

What exactly is inflation?

• Inflation is defined as an increase in the prices of most products and services used on a daily or regular basis, such as food, clothes, housing, recreation, transportation, consumer staples, and so on. In other terms, inflation denotes the deteriorating value or buying power of a unit of a country's currency.

What are the two indexes used to calculate inflation?

1. WPI - Wholesale Price Index

WPI, which measures producer-level inflation, is published by the Ministry of Commerce and Industry's Office of Economic Adviser. The general population does not buy things at wholesale prices, which is a major critique of this index.

2. Consumer Price Index (CPI)

The CPI measures changes in consumer prices and is published by the National Statistical Office (NSO).

CPIs are classified into four types:

Industrial Workers' CPI (IW).

Agricultural Laborer CPI (AL).

Rural Laborer(RL) CPI.

Consumer Price Index (Rural/Urban/Combined).

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