Question

In India, inflation is measured by
1. Wholesale price index number
2. Consumer price index 
3. Consumer price index for agricultural workers
4. National income deflation

Answer 1

Correct Answer - Option 2 : Consumer price index 

The correct answer is Consumer price index.

• Many developing countries use changes in the consumer price index (CPI) as their central measure of inflation.
• In India, CPI (combined) is declared as the new standard for measuring inflation (April 2014).
• CPI numbers are typically measured monthly, and with a significant lag, making them unsuitable for policy use.
• Inflation is the measured surge in the average prices of goods and services over a longer period in the economy.
• It is a macro term in which the impact of inflation on a large basket of goods is seen.
• As the value of money is decreased, the cumulative impact of inflation is reported as the buying power of money is reduced.

• A wholesale price index (WPI) is an index that measures and monitors changes in the price of goods at stages prior to the retail level. This applies to goods sold in bulk and exchanged between companies or companies (instead of between consumers).
• The Consumer Price Index (CPI) is a metric examining the weighted average of consumer goods and services basket prices such as transport, food and medical care.