Prelims Perspective: What needs to be learned?

  • What is inflation?
  • How is inflation measured, and who measures it
  • The challenges of inflation upon economy

What needs to be known?

  • What is inflation?
    • Inflation occurs when there is a broad increase in the prices of goods and services. It reduces the purchasing power of money as seen in Iran.
  • How is it measured?
    • The Wholesale Price Index (WPI) and the Consumer Price Index (CPI) are used to measure inflation in India.
    • But CPI is the primary source for measuring inflation since 2013, based on recommendations of the Urjit Patel Committee
  • Who measures inflation in India?
    • The Ministry of Statistics measures CPI, while the WPI is measured by the Ministry of Commerce.
  • Challenges of Inflation 
    • Reduced Purchasing Power
    • Erosion of Savings
    • Higher Borrowing Costs
    • Reduced Competitiveness

Source: The Hindu