Question

In India inflation is measured by the__________

Answer 1

In India, inflation is measured by the two major indices. They are the Consumer Price Index (CPI) and Wholesale Price Index (WPI). Let us first know what is meant by inflation.

Inflation

A calculated surge in the average prices of goods and services for a longer duration in the economy is called inflation. It is a macro concept, wherein the effect of inflation is seen over a large basket of goods. The total effect of inflation is recorded as the value of money is reduced that is the purchasing power of money is reduced.

Consumer Price Index and Wholesale Price Index

These are the major indices used to measure inflation in India.

Comparison between CPI and WPI

Wholesale Price Index	Consumer Price Index
Definition	Amounts related to the average change in prices of commodities at the wholesale level or market price.	Amounts related to the average change in the prices of commodities at the retail level or retail market price.
Publishing office	Office of Economic Advisor which comes under the Ministry of Commerce & Industry publishes the details.	Central Statistics Office which comes under the Ministry of Statistics and Programme Implementation publishes the details.
Commodities	Restricted only to Goods	Restricted to both Goods and Services
Inflation Measurement	At the initial stage of a transaction, inflation is measured	At the final stage of a transaction, inflation is measured
Prices paid by	Manufacturers and wholesalers pay the prices of the goods	Consumers pay the prices of the goods and services
Types of Commodities covered	Al sorts of manufacturing inputs and intermediate goods like minerals, machinery basic metals, etc are under the shelter of WPI	All public beneficiary services like Education, communication, transportation, recreation, apparel, foods and beverages, housing and medical care come under the shelter of CPI
Base Year	2011-12	2012