INFLATION
1. INFLATION :
Continuous rise in the general level of prices of goods and services in an economy over a period of time and, consequently, the purchasing power of currency falls. The rate of inflation is measured on the basis of price indices viz Wholesale Price Index (WPI) ad Consumer Price Index (CPI). A price index is a weighted average of the prices of a number of goods and services.
2. COST-PUSH INFLATION :
This type of inflation is caused by a sudden rise in the cost of production while demand for products or services decreases or remains the same. The additional production cost is transferred to buyers in the form of an increase in retail price.
3. DEMAND-PULL INFLATION :
This type of inflation can be described as too much money, too few goods. It happens when there is a shortage of supply, and the economy demands more goods and services than are available. This results in price increases, which will remain until supply can finally match demand and maintain the balance. This usually happens to growing economies.
4. CORE INFLATION :
An inflation measure which excludes transitory or temporary price volatility as in the case of some commodities such as food items, energy products etc. It reflects the inflation trend in an economy. Core inflation is inflation confined to non-energy and non-food articles.
5. HEADLINE INFLATION :
The headline inflation measure demonstrates overall inflation in the economy. This includes inflation effect of volatile food and energy consumption products as well. Headline inflation is the actual inflation figure expressed in CPI or WPI.
6. DEFLATION :
When the overall price level decreases so that inflation rate becomes negative, it is deflation. It is opposite of inflation.
7. DISINFLATION :
Disinflation is slowing down of the rate of inflation. It is used to describe instances where the inflation rate has reduced marginally over a short term.
8. INFLATION TARGETING :
Inflation targeting is a monetary policy regime in which a central bank has an explicit target inflation rate for the medium term and announces this inflation target to the public. In case of India, RBI has announced inflation target of 4 % with a window of 2% plus or minus. I.e. inflation rate to remain between 2% to 6%.
9. GDP DEFLATOR :
This is calculated as the ratio of GDP at current price to GDP at constant price. If GDP at current and constant price remains the same, the value of GDP deflator is 1. If the GDP deflator has a value of more than 1, this means that the prices have risen in the current year as compared to the constant year.
10. WHOLESALE PRICE INDEX (WPI) :
There is a price difference in cost of good in the wholesale market and retail shops. We all know that goods in wholesale market is cheaper than that in retail shops. But normally people cannot buy goods from the wholesale market as these good are only sold in bulk. Every commodity before reaching the public first goes to the wholesaler and then to the local shops. The prices which prevails in the wholesale market and an increase in these prices is calculated through WPI. Latest base year for WPI calculation is 2011-2012 with effect April 2017.
11. CONSUMER PRICE INDEX (CPI) :
CPI deals with the retail prices which effects every individual’s pocket. It takes into account the price rise of commodities used directly by consumers. All these commodities together are called consumption basket of CPI. Through the CPI one can get to know about the rate of increase in the prices of the daily goods that people buy. The groups in CPI calculation are Food and Beverages, Fuel and Lighting, Housing, Clothing n Footwear and Miscellaneous which include selected services like health, education, recreation etc. Base year for CPI is 2012.
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