Inflation,Consumer Price Index(CPI), Wholesale Price Index (WPI) and More
Inflation is defined as a persistent increase in the costs of goods and services in an economic system, over a period of time. It is normally mentioned as percentage increase per annum. With increase in inflation, the amount you own today cannot get you same quantity of goods or services, in future. This means a decline in the purchasing power of money.
There are various methods of measuring the inflation. Different countries adopt different methodologies and indexes. Consumer Price Index, Whole Sale Price Index, Producer Price Index etc are some of the major indexes used to measure inflation.
Major indexes used to measure inflation
Whole sale Price Index (WPI)
Whole sale Price Index (WPI) is used to assess the change in the average price level of goods traded in wholesale market. It indicates the price changes of a basket of commodities in trade transactions.
Consumer Price Index (CPI)
Consumer Price Index (CPI) is a measure that assesses the price changes in the weighted average of the prices of a basket of consumer goods and services. This basket of items contains goods and services such as medicines, vegetables, food items, transportation etc which have more bearing on the daily life of a person. This index is commonly used as a measure of cost of living in a country. Consumer Price Index is often used to measure and control inflation in a country by the central banks and governments.
In Consumer Price Index itself, there are different variants or subcategories like that meant for urban workers, urban consumers, manual employees, rural labourers etc.
Producer Price Indexes (PPI)
Producer Price Indexes (PPI) measures the change in average selling price by domestic producers of goods and services. It is assessed from the perspective of seller.
Which are the major inflation indexes followed in US?
In US, Consumer Price Index and Producer Price Index are normally tracked. They also measure subcategories of CPI like CPI for urban wage earners and clerical workers (CPI-W), and the chained CPI for all urban consumers (C-CPI-U).
The U S Bureau of Labor Statistics tracks the price changes. Each month, they contact thousands of retail stores, service providers like doctors, rental units to collect price information of around 80,000 items.
Which are the major inflation indexes followed in India?
Consumer Price Index (CPI) and Wholesale Price Index(WPI) are followed in India to measure inflation. WPI was first published in India in 1902 and was used as major economic indicator till 1970s. Now, CPI is mainly used as a measure of Inflation. There are four sub categories for CPI. They are CPI UNME (Urban Non-Manual Employee), CPI AL (Agricultural Labourer), CPI RL (Rural Labourer) and CPI IW (Industrial Worker). Dearness allowance, an integral part of salary of employees is decided on the basis of CPI.
WPI numbers are measured by Ministry of Commerce and Industry. CPI UNME series is published by the Central Statistical Organisation, the other CPI variants are published by the Department of Labour.
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