How inflation rate is calculated in India?

Most frequently hearing word in news is Inflation. We will give a brief explanation on what it is and how it is calculated

What is inflation?

Inflation: is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy. In india WPI used to calculate Inflation.

WPI - Wholesale Price Index (WPI) is the price of a representative basket of wholesale goods. Some countries (like India and Philippines) use WPI changes as a central measure of inflation However, United States now report a producer price index instead. In India WPI s having 435 commodities in its basket

The Wholesale Price Index or WPI is the price of a representative basket of wholesale goods. Some countries use the changes in this index to measure inflation in their economies, in particular India – The Indian WPI figure is released weekly on every thursday and influences stock and fixed price markets. The Wholesale Price Index focuses on the price of goods traded between corporations, rather than goods bought by consumers, which is measured by the Consumer Price Index.The purpose of the WPI is to monitor price movements that reflect supply and demand in industry, manufacturing and construction. This helps in analyzing both macroeconomic and microeconomic conditions.