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Inflation and measurement (Measures of Inflation (WPI (3 Major Groups…
Inflation and measurement
Definitions
Inflation
An increase in the general level of prices in an economy that is sustained over time
Disinflation
The opposite of inflation
Deflation
When the general level of prices is falling over a period of time
Measures of Inflation
WPI
By the Office of Economic Advisor (OEA), Department of Industrial Policy and Promotion, Ministry of Commerce and Industry
3 Major Groups
Manufactured Products» Primary Articles, >Fuel & Power
Increase in number of items from 676 to 697. In all 199 new items have been added and 146 old items have been dropped.
In general, reflects the rate of change in prices of all goods and
not services
in an economy over a period of time
In India,
headline inflation
is measured through the WPI
Among manufactured products, the highest weightage is of chemicals and chemical products.
WPI covers all goods including intermediate goods transacted in the economy.
CPI
Types
CPI for Industrial Workers (IW)
by the Labour Bureau in the Ministry of Labour and Employment,
CPI (Rural/Urban/Combined)
By the
Central Statistics Office (CSO) in the Ministry of Statistics and Programme Implementation
.
CPI for Agricultural Labourers (AL)/ Rural Labourers (RL)
by the Labour Bureau in the Ministry of Labour and Employment,
The number of items in CPI basket include 448 in rural and 460 in urban. Thus, it makes it clear that
CPI basket is broader than WPI basket.
CPI covers consumer goods and consumer services.
Food and beverages > miscellaneous>housing >fuel and light> clothing & footwear> pan, tobacco
IIP
maximum weightage is given to Basic goods, followed by Consumer Goods, followed by Intermediate and Capital Goods.
Among Consumer goods, the weightage of consumer non-durables is much more than of durables.
by Central Statistics Office (CSO) of the Union Ministry of Statistics and Programme Implementation
It covers 682 items comprising Manufacturing (620 items), Mining (61 items) & Electricity (1 item).
GDP deflator
most comprehensive measure is GDP deflator which is measured as
ratio of GDP (Gross Domestic Product) at current prices to GDP at constant prices.
This data is released by the
Central Statistical Organisation (CSO)
Macroeconomic Vulnerability Index (MVI)
It adds together the rate of inflation, current account deficit and fiscal deficit of a country.