Group 4

Ashish Jalan (211121)

Tapsi Ahuja (211148)

Varun Bagai (211159)

Vineet R Singh (211165)

Yukti Agarwal (211169)

MACROECONOMICS

is a rise in the general level of prices of goods and services in an economy.

Inflation results in the loss of purchasing power of money.

Calculation Methods:1. Wholesale Price Index2. Consumer Price Index3. GDP Deflator

Inflation

It measures the rise in prices of wholesale goods

Fixed basket of goods.Calculated on wholesale prices.Has been used in India to measure the

inflation level

Wholesale Price Index

Measures the changes in the price level of consumer goods and services purchased by households.

Has a fixed basket of goods and services.Most commonly used measure of Inflation

Consumer Price Index (CPI)

GDP deflator is a measure of the level of prices of all new, domestically produced, final goods and services in an economy.

It helps to measure the actual growth of GDP by taking care of the price level changes

GDP Deflator: (Nominal GDP/Real GDP) x 100

GDP Deflator

CPI is a better measure of inflation.It measures inflation as experienced by

consumers in their day-to-day living expenses.

GDP deflator is a close substitute of CPI but it is difficult to calculate as the basket of goods and services keeps on changing every year.

Best Measure of Inflation

INFLATION IN INDIA

1980

-81

1981

-82

1982

-83

1983

-84

1984

-85

1985

-86

1986

-87

1987

-88

1988

-89

1989

-90

1990

-91

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

0

2

4

6

8

10

12

14

16

WPICPI

1980

-81

1981

-82

1982

-83

1983

-84

1984

-85

1985

-86

1986

-87

1987

-88

1988

-89

1989

-90

1990

-91

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

0

20

40

60

80

100

120

140

160

180

GDP Deflator

GDP Deflator

1. Food, Beverages and TobaccoCereals and products Pulses and productsMilk and milk productsOils and fatsEgg, fish and meatCondiments and spicesVegetablesFruitsSugar, honey etc.Non-alcoholic beveragesPrepared meals etc.Pan, tobacco and intoxicants

Composition of CPI

2. Fuel and light3. Housing4. Clothing, bedding and footwear

Clothing and beddingFootwear

5. MiscellaneousEducationMedical careRecreationTransport & communicationPersonal care and effectsHousehold RequisitesOthers

Description

Jan Feb Mar Apr May Jun Jul Aug Sep

Food, beverages & tobacco

112.7 113.4 114.9 117.2 118.6 120.3 123.2 125.1 126.1

Fuel and light 119.8 120.0 120.3 121 121.7 122.7 123.9 125.4 126.5

Housing 112.9 113.6 114.4 115.3 116.2 117.5 118.4 119.5 120.6

Clothing, bedding & footwear

122.7 123.3 124.2 125.3 126.5 127.7 128.9 130.2 131.5

Miscellaneous 113.4 113.7 114.1 114.6 115.7 116.7 117.1 117.8 118.9

General Index 114 114.6 115.6 117.1 118.2 119.7 121.4 122.9 124

Inflation in the current year (based on CPI)

Inflation calculated by taking 2010 (base year) values as 100

The rate of inflation has been increasing for all categories.

The highest increase is seen in food, beverages and tobacco.

Hence, general index has increased from 14% in January to 24% in September.

Analysis

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