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Uses of Index Number.

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Uses of Index Number:

1. Price Index Number is used to determine the purchasing power of money at a given point of time.

2. To convert the current monetary values of the different activities of the country like agricultural production, industrial and small industries production and national domestic production into real values.

3. It is used to study the overall conditions prevailing in business and trade of the country.

4. Uses of different Index Numbers:

  • Wholesale Price Index Number: It is used to study the changes in the price level of the country.
  • Cost of Living Index Number: It is used by the government to determine pay scales, dearness allowances, bonus, etc. of government employees and to devise taxation policy.
  • Index Number of National Income: To determine the targets for the five year plans and to evaluate the economic condition of the country.
  • Index Number for Agricultural Production: It helps the government to devise suitable agricultural policies and to verify whether the farmers get appropriate prices for their agricultural products or not.
  • Index Number of Import-Export: It is used to determine export-import policy foreign exchange requirement and to stipulate norms for taxations on goods to be imported and exported.
  • Index Number of Industrial Productions: It is useful to study the changes occurring in production in industries and manufacturing units and also to business houses in planning of trading and industrial activities in the country.
  • Index Number for Employment: It provides the picture of employment prevailing in the country as well as it is helpful to the government for manpower planning.
  • Index Number for Capital Investments: It is used to study the changes in prices of shares and stock as well as the mobility of investments.
  • Index Number of Raw Materials: It is used for assessing the feasibilities of importing as well as exporting raw materials.
  • Index Number of Human Development: It is useful to determine the state of human resource, standard of living, life expectancy and level of education.
  • Index Number of Trade: It provides useful guidance to study the general situation of economic activities of business and trade in the country.

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