How inflation is calculated in India

In the previous article we discussed about what is Inflation. Now we would like to cover how inflation is calculated in India. India uses Wholesale Price Index (WPI) to calculate inflation.

Wholesale Price Index measures the average of the changes of goods and services price on the basis of wholesale price. Presently 435 commodities price level is being tracked through whole sale price index in India. It is also the price index which is available on a weekly basis with the shortest possible time lag of only two weeks. India considers 1993-94 financial year as base year for present WPI index calculation.

The 435 commodities are divided into different groups & sub groups. The list of 435 commodities can be found here. Each commodity has some weightage in the WPI index. Below are the weightages of commodities group wise: Read more

January 17, 2009 | Filed Under Economy | 2 Comments 

What is the difference between recession and depression?

As we posted on recession previously, a recession is generally described as a significant decline (Negative growth rate) in country’s GDP (Gross domestic product) for at least two quarters or longer. Generally a recession is preceded by several quarters of slowing down in economic activity. 

So what is depression? Depression is nothing but a recession, which lasts longer and its impact is deeper. If any downturn in the economy or GDP can be called as recession then more than 10 percent decline in GDP is called depression. If you look at the last century, we could observe many recessions but depressions are few. United States 1929 great depression was the largest and most important economic depression in modern history and is used in the 21st century as an example of how far the world’s economy can fall. The great depression which started on 29th October 1929 lasted till around 1939. Read more

January 1, 2009 | Filed Under Economy | Leave a Comment 

What is Recession ?

 

 

 

 

 

 

 

 

 

A recession is generally described as a significant decline( negative growth rate) in country’s GDP(Gross domestic product) for at least two quarters or longer. If you observe businesses are not exapanding, unemployement rises, housing and real estate prices decline on large scale then you can say that either recession started or we are in recession. 

National Bureau of Economic Research (NBER) of united states defines economic recession as: "a significant decline in [the] economic activity spread across the economy, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales." Read more

January 1, 2009 | Filed Under Economy | 1 Comment 

What Is Inflation?

Inflation is an increase in the average level of prices for goods and services. In other way, we can say it is an index, which shows how prices of goods and services that is representative of the economy as a whole are growing. 

The immediate effect of inflation is the value of rupee/dollar (based on the country you are staying) decreases at par with inflation. That means the purchasing power of your ‘money’ decreases. If you want to understand it better, consider the below example.

Date : 31st December 2008
Price of 1KG rice :  Rs 20

If the inflation raises 10% annually(i.e. if inflation throughout the year is 10% - just assume  this) Read more

December 20, 2008 | Filed Under Economy | Leave a Comment 

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