How government calculate Inflation rate?
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Answer Posted / pinal
* India uses the Wholesale Price Index (WPI) to
calculate and then decide the inflation rate in the economy.
* Most developed countries use the Consumer Price Index
(CPI) to calculate inflation.
WPI was first published in 1902, and was one of the more
economic indicators available to policy makers until it was
replaced by most developed countries by the Consumer Price
Index in the 1970s.
WPI is the index that is used to measure the change in the
average price level of goods traded in wholesale market. In
India, a total of 435 commodities data on price level is
tracked through WPI which is an indicator of movement in
prices of commodities in all trade and transactions. It is
also the price index which is available on a weekly basis
with the shortest possible time lag only two weeks. The
Indian government has taken WPI as an indicator of the rate
of inflation in the economy.
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