Controversies in India for using WPI Measuring System

Inflation is defined as the increase in supply money due to rapid increase in prices of goods and services. Indian middle and low level communities are getting heftily hit by inflation. People having a tight budget are finding it hard these days to afford even the basic amenities of living. As per latest news, India’s inflation rate was recorded at around 7% previous month. Increasing inflation rates directly point towards the economical condition of any country. This increase in inflation rates has surely put India in series of countries facing economical crisis. India is a country where people have diverse economy model, hence the challenges faced are vital for its growth. The recent rise in inflation has been found to consist of several political and economic crisis. Measurement of Inflation Rate:Measurement of inflation rate is based upon two systems namely Consumer Price Index(CPI) and Wholesale Price Index(WPI). In India CPI is not practicably used for measuring inflation rates as there is too much of a lag in reporting the Consumer Price Index numbers. Also, CPI is calculated on monthly basis, which is also a reason for its non-acceptance. Thus, India follows WPI system for measuring its inflation rate. Latest budget in India news, encountered an increase in goods and service prices which resulted in increased rate of inflation. Although, measurement criteria followed currently is also in issues as several economists find it a faulty measure. It’s been a question that why India is using WPI as measurement system whereas other developed countries are using measures of CPI for defining inflation rates. Inflation based upon the consumer price index (CPI) is the main inflation indicator in most countries.[View - UP news]In latest India news, build up inflation in the financial year so far was 5.71% compared to a buildup of 6.56% in the corresponding period of the previous year. A good environment of price stability happens to create saving mobilization and a sustained economic growth. There often arises problem when the quality improvements in the product are needed. This affects the price index, hence increasing the rate of inflation. Inflation in India generally occurs as a result of globally traded supplies and the several efforts made by governing bodies to weaken currencies. This has been regarded as the root cause of inflation crisis rather than the domestic inflation. Other factors that are impacting inflation rates are scarcity of supply while demands are high, lesser developed financial market and exchange rate determination.