{"id":58988,"date":"2020-04-20T13:50:54","date_gmt":"2020-04-20T08:20:54","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=58988"},"modified":"2021-05-11T14:16:43","modified_gmt":"2021-05-11T08:46:43","slug":"eco-103-inflation","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/eco-103-inflation\/","title":{"rendered":"[Eco – 103] Part 2\/3 – Inflation – Understanding WPI\/CPI\/PPI and more."},"content":{"rendered":"

Hi There ,<\/p>\n

As you know Economy as a subject has always been a traditional bottleneck for Civil Services aspirants. This is because most of us did not study it during our school days.<\/p>\n

So in this series of articles<\/em>, we will be taking up the numerous economic jargon, one by one and try to simplify them for you.<\/p>\n

We aim to do the above by explaining various economic terms in a simple and a lucid manner. This will be especially beneficial for the students who are going to give their first attempt.<\/p>\n

This is the 2nd article in the 3 part series on Inflation. In the previous article we had <\/span>understood the concept of Inflation\u00a0<\/span><\/p>\n

If you haven’t read the part-1 of the Inflation series then <\/span>Click Here<\/span><\/a><\/p>\n

In this article we will understand how inflation is measured in India and what are the different types of Indexes used to measure inflation viz:<\/span><\/p>\n

    \n
  1. Wholesale Price Index (WPI)<\/span><\/li>\n
  2. Consumer Price Index (CPI)<\/span><\/li>\n
  3. Producers Price Index (PPI)<\/span><\/li>\n<\/ol>\n

    So let\u2019s begin<\/span><\/p>\n

    What is a Price Index<\/b><\/h3>\n

    As we have learned in the previous article – Inflation is sustained increase in price of basket of goods and services over a period of time.<\/span><\/p>\n

    Economists measure the price level with a price index. A price index is a number whose movement reflects movement in the average level of prices. If a price index rises 10%, it means the average level of prices has risen 10%.<\/span><\/p>\n

    The price index is an indicator of the average price movement over a period of time of a fixed basket of goods and services.\u00a0<\/span><\/p>\n

    The constitution of the basket of goods services is done keeping into consideration whether changes are to be measured in retail, wholesale or producer price etc.\u00a0<\/span><\/p>\n

    The basket will also vary for economy wide, regional or sector specific series.\u00a0<\/span><\/p>\n

    At present, separate series of index numbers are compiled to capture the price movements at retail and wholesale level in India.\u00a0<\/span><\/p>\n

    Some of the important indices like Wholesale Price Index (WPI), Consumer Price Index (CPI), etc. give a fairly good idea as to what is happening in the economy.\u00a0<\/span><\/p>\n

    Among the price indices in India,\u00a0<\/span><\/p>\n