Why in news : Recently Retail inflation in India has reached 5.88% in November. This is the first time in 2022 that retail inflation falling below 6%.
What is Inflation?
- Inflation generally denotes to persistent rise in the average price of goods and services.
Types of inflation :
- Creeping inflation : It is when the rate of general price increase if upto 4 percent in a year.
- Trotting inflation : If the creeping inflation is not controlled then it may result into Trotting inflation. The price rise may increase up to 8-10 percent a year.
- Hyperinflation : It is when the prices are out of control. The monthly inflation may reach upto 20 to 30 percent or more.
Measures of Inflation :
There are basically 2 most important indices which measure the inflation at different levels and by taking different items in to count.
- Wholesale Price Index (WPI)
- Consumer Price Index (CPI)
Wholesale Price Index :
- Wholesale price index tracks the price changes at wholesale level.
- It is released by the Office of Economic Advisor, Ministry of Commerce and Industry.
- It covers only goods. It does not include services.
- The base year is 2011-12.
- The number of articles included in it are 697.
- The type of articles included are Manufacturing inputs, Machinery goods and intermediate goods.
Consumer Price Index :
- It generally indicates the average changes in the price level at retail level.
- It is released by the National Statistical Office, Ministry of Statistics and Program Implementation.
- It includes both goods and services.
- The base year is 2012.
- It has 448 articles in CPI-rural index and 460 articles in CPI- Urban.
- The dearness allowance of Government employees and wage contracts between labour and employer are based on the CPI.
- CPIs have been widely used as a macroeconomic indicator.
- It is also used by the Government and central bank of the country for targeting the inflation and to monitor the price stability in the economy.
Syllabus : Prelims + Mains; GS3- Indian Economy