INFLATION MEASUREMENT

INFLATION MEASUREMENT :
- Inflation rate forms part of important macro economic indicators used by policy makers particularly central bankers in policy formulation.
- Inflation could be measured through three sets of price indices namely, the Whole price indices (WPI), implicit National Income Deflator and Consumer Price Indices (CPI).
- The WPI is compiled for all commodities as well as major groups and individual commodities and is published on a weekly basis since 1942.
- Weights are assigned to the commodities / sub groups / major groups on the basis of the value of the whole sale market transactions at the time of adoption of the base year.
- The commodities are classified under 3 major groups, (1) primary articles, (2) fuel, power, light and lubricants and (3) manufactured products.
- This index because of the good frequency of availability helps continuous monitoring.
- The National Income Drflator, a comprehensive index is derived as ratio of GDP at current prices to GDP in real terms.
- It encompasses all the economic activities including services.
- The CPI reflects the retail prices of selected goods in the commodity market of homogeneous group of consumers.
- Consumer price indices are separately computed for (1) industrial workers (2) urban non-manual employees and (3) agricultural labourers.
- The major groups convered are food, pan supary, tobacco, intoxicants, fuel, housing, clothing, bedding, and footwear and miscellaneous items.