CPI, WPI, GDP Deflator, and Inflation Rate UPSC Prelims Quiz

Inflation is measured by a central government authority, which is in charge of adopting measures to ensure the smooth running of the economy. In India, the Ministry of Statistics and Programme Implementation measures inflation.

There exists a situation in an economy where inflation is fuelled up, not because of increase in Aggregate Demand but mainly due to increase in the cost of producing goods and services. This is called cost-push inflation. Deficit financing by the government – When the government spends more freely, prices go up. This causes an increase in aggregate demand in the economy which is known as demand-pull inflation.

An inflationary situation in an economy that results out of a process of wage and price interaction ‘when wages press prices up and prices pull wages up’ is known as the inflationary spiral. It is also known as the wage-price spiral. This wage-price interaction was seen as a plausible cause of inflation in the year 1935 in the US economy, for the first time.

It is a graphic curve that advocates a relationship between inflation and unemployment in an economy. As per the curve there is a ‘trade off’ between inflation and unemployment i.e. an inverse relationship between them.

Disinflation: Disinflation is a situation in which the rate of inflation falls over a period of time. Deflation is when the overall price level in the economy falls for a period of time.

The Labour Bureau: Labour Bureau also compiles and releases indices to meet the specific requirements of the Index users of the respective states. The publication also contains various other related information viz., Inflation rate, Linking Factors, Centre-wise Group/Sub-Group weights andAll-India item wise weight for Old series and New series. Headquarters: Chandigarh and Shimla. It is responsible for the collection, compilation and publication of labour statistics and other information relating to labour such as employment and unemployment, wages, earnings, industrial relations, working conditions etc. Conducting research studies and surveys on labour-related matters in organized/ unorganized sectors covering SC/ ST Workers, Women Labour, Contract Workers and occupational wage surveys in manufacturing industries, mines, plantations and service sectors.

The weightage is as follows: Manufactured Products (64.20%), Primary Articles (22.60%) and Fuel & Power (13.10%).

Wholesale Price Index includes only the goods.

In India inflation is calculated by using Wholesale Price Index. WPI calculates the price paid by the manufacturers and wholesalers in the market.

CPI calculates the average price paid by the consumer to the shopkeepers. The CPI measures the expenses like education, communication, transportation, recreation, apparel, foods and beverages, housing and medical care.