Inflation Calculation in India

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The annualized inflation rate in India is 3.78% as of August 2015, as per the Indian Ministry of Statistics and Programme Implementation.

This represents a modest reduction from the previous annual figure of 9.6% for June 2011.

Inflation rates in India are usually quoted as changes in the Wholesale Price Index, for all commodities.

Many developing countries use changes in the Consumer Price Index as their central measure of inflation.

India used Wholesale Price Index as the measure for inflation but new CPI(combined) is declared as the new standard for measuring inflation ( April 2014) Consumer Price Index numbers are typically measured monthly, and with a significant lag, making them unsuitable for policy use.

Instead, India uses changes in the Wholesale Price Index to measure its rate of inflation.

Provisional annual inflation rate based on all India general Consumer Price Index (Combined) for November 2013 on point to point basis (November 2013 over November 2012) is 11.24% as compared to 10.17% (final) for the previous month of October 2013.


The corresponding provisional inflation rates for rural and urban areas for November 2013 are 11.74% and 10.53% respectively.

Inflation rates for rural and urban areas for October 2013 are 10.19% and 10.20% respectively.

The WPI measures the price of a representative basket of wholesale goods.

In India, this basket is composed of three groups:
Primary Articles (20.1% of total weight),
Fuel and Power (14.9%) and
Manufactured Products (65%)

Food Articles from the Primary Articles Group account for 14.3% of the total weight.

The most important components of the Manufactured Products Group are
Chemicals and Chemical products (12%);
Basic Metals, Alloys and Metal Products (10.8%);
Machinery and Machine Tools (8.9%);
Textiles (7.3%) and
Transport, Equipment and Parts (5.2%)

WPI numbers are typically measured weekly by the Ministry of Commerce and Industry.

This makes it timelier than the lagging and infrequent CPI statistic.


Value
The inflation rate in India was recorded at 6.1% (WPI) in August 2013.

Historically, from 1969 until 2013, the inflation rate in India averaged 7.7% reaching an all time high of 34.7% in September 1974 and a record low of -11.3% in May 1976.

The inflation rate for Primary Articles is currently at 9.8% (as of 2012).

This breaks down into a rate 7.3% for Food, 9.6% for Non-Food Agriculturals, and 26.6% for Mining Products.

The inflation rate for Fuel and Power is at 14.0%. Finally, the inflation rate for Manufactured Articles is currently at 7.3%.


Issues
The Optimal Inflation Rate

Money Supply and Inflation

Global Trade

Factors
Demand Factors

Supply Factors

Domestic Factors

External Factors