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English · हिन्दी · తెలుగు · தமிழ் · മലയാളം · मराठी · ಕನ್ನಡ

Quick recap: Inflation on one page

मराठीत स्पष्टीकरण

Inflation · Quick recap · Fact-checked on · how we check

Written with AI from the sources listed at the bottom of this page, then fact-checked by a separate AI.

Both parts of Inflation condensed for quick revision: price indices and who compiles them, the new CPI and WPI series, core inflation and the base effect, causes and types, who gains and loses, the inflation target under the RBI Act and the Monetary Policy Committee, with a one-table overview and eight mixed questions.

Each idea is explained first in Marathi (मराठी), ending with the English and Hindi exam terms, followed by the same point in exam English. UPSC Prelims is in English or Hindi, so understand it in Marathi and revise it in English.

चलनवाढ म्हणजे एकूण किंमत पातळी सतत वाढणे — प्रत्येक रुपया कमी खरेदी करतो. ती किंमत निर्देशांकाने मोजतात: खर्चातील वाट्यानुसार भार दिलेली वस्तूंची पिशवी, आधार काळ = 100. बातम्यांतील दर बहुधा गेल्या वर्षीच्या त्याच महिन्याशी तुलना असतो; म्हणून गेल्या वर्षी भाव जास्त असतील तर यंदाचा दर कमी दिसतो, भाव अजून वाढत असले तरी. (→ English: inflation · हिन्दी: मुद्रास्फीति)

In exam Englishinflation is a sustained rise in the general price level, which means a fall in what each rupee can buy. It is measured with price indices: a basket of goods and services, weighted by its share in spending, priced against a base period set at 100. The rate in the news is usually year-on-year, so it carries a base effect: a high level last year makes this year's rate look low even when prices are still rising.

आपल्याकडे अनेक निर्देशांक — प्रत्येकाचा वेगळा संकलक, वेगळा आधार. ग्राहक किंमत निर्देशांक (ग्रामीण, शहरी, एकत्रित): NSO, दर महिन्याच्या 12 तारखेला; नवा आधार 2024, जानेवारी 2026 पासून, 2023-24 सर्वेक्षणाचे भार, 12 विभागांत 358 वस्तू, अन्नाचा वाटा 45.86% वरून 36.75%. कामगार ब्युरो: CPI-IW (2016) वरून महागाई भत्ता, CPI-AL/RL (2019) वरून शेतीतील किमान वेतन. घाऊक किंमत निर्देशांक: DPIIT चे आर्थिक सल्लागार कार्यालय, 14 तारखेला; फक्त वस्तू; नवा आधार 2022-23 (जून 2026); उत्पादित वस्तूंचा वाटा 63.13%; त्यासोबत आलेले PPI पाच वर्षांनी त्याची जागा घेतील. (→ English: Consumer Price Index · Wholesale Price Index · हिन्दी: उपभोक्ता मूल्य सूचकांक · थोक मूल्य सूचकांक)

In exam EnglishIndia has several indices, each with its own compiler and base. The NSO of MoSPI compiles the Consumer Price Index (Rural, Urban and Combined), released on the 12th of each month; its new series with base 2024=100 began with January 2026 data, uses weights from the Household Consumption Expenditure Survey 2023-24, has 358 items in 12 divisions, and gives food and beverages 36.75 per cent of the basket, down from 45.86 per cent. The Labour Bureau compiles CPI-IW (base 2016) for dearness allowance and CPI-AL and CPI-RL (base 2019) for agricultural minimum wages. The Wholesale Price Index, compiled by the Office of the Economic Adviser in DPIIT and released on the 14th, covers goods only; its new base is 2022-23 (June 2026), manufactured products carry 63.13 per cent of its weight, and producer price indices launched with it are to replace it after five years.

दोन्ही निर्देशांक वेगवेगळ्या पिशव्या वेगवेगळ्या टप्प्यांवर मोजतात म्हणून वेगवेगळे चालतात; 2015 मध्ये तेल आणि धातूंचे भाव घसरले तेव्हा घाऊक दर महिनोन्महिने उणे, तर ग्राहक दर अधिक होता. 2014 च्या उर्जित पटेल समितीपासून 'एकत्रित' ग्राहक निर्देशांक हाच पतधोरणाचा आधार — लोकांच्या अपेक्षा घरखर्चावर ठरतात. मूलभूत चलनवाढ हेलकावणारे अन्न आणि इंधन वगळून खरा कल दाखवते; तो वेगळा अधिकृत निर्देशांक नाही, लक्ष्य संपूर्ण निर्देशांकावरच. जीडीपी अपस्फीतिदर्शक सर्वांत व्यापक — संपूर्ण देशांतर्गत उत्पादन, आयात नाही — पण फक्त दर तिमाहीला. (→ English: core inflation · हिन्दी: कोर मुद्रास्फीति)

In exam EnglishCPI and WPI diverge because they measure different baskets at different stages; in 2015, when world oil and metal prices fell, WPI inflation was negative for months while CPI inflation stayed positive. Since the Urjit Patel Committee's report in 2014, CPI (Combined) has been the anchor of monetary policy, because it reflects the cost of living that shapes expectations. core inflation leaves out volatile food and fuel to show the underlying trend, but it is not a separate official index and the target is set for headline CPI. The GDP deflator is the broadest measure, covering all domestic output and excluding imports, but it comes only quarterly.
Inflation at a glance
ItemKey fact
CPI (Rural, Urban, Combined)NSO, MoSPI; base 2024=100; released on the 12th
CPI-IW; CPI-AL and CPI-RLLabour Bureau; base 2016 and 2019
WPIOffice of the Economic Adviser, DPIIT; base 2022-23; goods only; released on the 14th
Core inflationCPI without food and fuel; not a separate official index
Inflation target (s.45ZA)4 per cent CPI (Combined), band 2-6 per cent; set by the Central Government with the RBI every five years
Failure (s.45ZN)Outside the band for three consecutive quarters; report to the government
MPC (s.45ZB)Six members, three external; Governor's casting vote; sets the repo rate

भाव दोन मार्गांनी वाढतात: मागणीजन्य (खर्च पुरवठ्यापेक्षा पुढे जाणे), खर्चजन्य (तेल, कच्चा माल, पगार, कमकुवत रुपया असे खर्च ढकलणे); अन्नासाठी पुरवठ्याचे धक्के आणि संरचनात्मक अडथळे महत्त्वाचे; वेतन-किंमत चक्र चलनवाढ टिकवते. वेगानुसार: रांगणारी, चालणारी, दौडणारी, अतिचलनवाढ. किंमत पातळी घसरली तर चलनघट; दर कमी झाला तरी अधिक असेल तर चलनवाढ घट; धोरणाने भाव आणि उत्पादन वर आणणे म्हणजे रिफ्लेशन; भाव जास्त आणि उत्पादन ठप्प तर मंदीयुक्त चलनवाढ. फिलिप्सचा सौदा अपेक्षा बदलेपर्यंतच, तात्पुरता. (→ English: stagflation · हिन्दी: मुद्रास्फीतिजनित मंदी)

In exam EnglishPrices rise through demand-pull, when spending outruns what the economy can supply, or cost-push, when costs such as crude oil, raw materials, wages or a weaker rupee push them up; supply shocks and structural bottlenecks matter especially for food, and a wage-price spiral can make inflation persist. By speed, inflation runs from creeping to walking, galloping and hyperinflation. Deflation is a falling price level, disinflation a slowing but positive rate, reflation a policy push to lift prices and output, and stagflation high inflation with stagnant output. The Phillips curve trade-off between unemployment and inflation holds at most in the short run, once expectations adjust.

चलनवाढ खरेदीशक्तीची फेरवाटणी करते: अनपेक्षित भाववाढ कर्ज घेणाऱ्याला फायदा, आणि कर्ज देणारे, बचत करणारे, ठरावीक उत्पन्नवाले यांना तोटा; गरिबांना सर्वांत जास्त फटका. वास्तविक व्याज ≈ नाममात्र व्याज − चलनवाढ. उर्जित पटेल समिती (2014) आणि करार (2015) नंतर वित्त अधिनियम 2016 ने RBI कायद्यात चलनवाढ लक्ष्य निर्धारण आणले. कलम 45ZA: केंद्र, RBI शी सल्लामसलत करून, दर पाच वर्षांनी लक्ष्य — 4% (2-6%); 2016, 2021, आणि पुन्हा 1 एप्रिल 2026 – 31 मार्च 2031. सलग तीन तिमाही पट्ट्याबाहेर राहिली तर अपयश; 45ZN अंतर्गत RBI चे सरकारला स्पष्टीकरण — पहिल्यांदा नोव्हेंबर 2022 मध्ये. (→ English: inflation targeting · हिन्दी: मुद्रास्फीति लक्ष्यीकरण)

In exam EnglishInflation redistributes purchasing power: unexpected inflation helps borrowers and hurts lenders, savers and people on fixed money incomes, and it falls hardest on the poor. The real interest rate is roughly the nominal rate minus inflation. To keep inflation low and stable, the Finance Act, 2016 wrote inflation targeting into the RBI Act, 1934, following the Urjit Patel Committee (2014) and the Monetary Policy Framework Agreement (2015). Under section 45ZA the Central Government, in consultation with the RBI, sets the target every five years: 4 per cent CPI (Combined) inflation with a band of 2 to 6 per cent, notified in 2016, retained in 2021 and retained again for 1 April 2026 to 31 March 2031. Failure means average inflation outside the band for three consecutive quarters; the RBI must then explain itself to the government under section 45ZN, as it first did in November 2022.

रेपो दर कलम 45ZB अंतर्गत पतधोरण समिती ठरवते. सहा जण: गव्हर्नर (अध्यक्ष), पतधोरणाचे डेप्युटी गव्हर्नर, मंडळाने नेमलेला एक RBI अधिकारी, आणि केंद्राने चार वर्षांसाठी (पुनर्नियुक्तीशिवाय) नेमलेले तीन बाहेरचे. वर्षातून किमान चार बैठका, गणपूर्ती चार, टाय झाल्यास गव्हर्नरचे निर्णायक मत; प्रत्येक मतासह इतिवृत्त 14 व्या दिवशी. रेपो वाढवला की मागणी थंडावते; सरकार साठा, खुल्या बाजारातील विक्री, जीवनावश्यक वस्तू कायदा 1955 अंतर्गत साठा मर्यादा, व्यापाराचे उपाय आणि कमी कर यांद्वारे पुरवठा सांभाळते. दोन्ही हात एकत्र आले तरच फळ. (→ English: Monetary Policy Committee · हिन्दी: मौद्रिक नीति समिति)

In exam EnglishThe Monetary Policy Committee under section 45ZB sets the policy repo rate. It has six members: the Governor (chair), the Deputy Governor in charge of monetary policy, one RBI officer nominated by the Central Board, and three external members appointed by the Central Government for four years without reappointment. It meets at least four times a year, needs four members for a quorum, and the Governor has a casting vote in a tie; minutes with each member's vote come out on the fourteenth day. Raising the repo rate cools demand, while the government acts on supply through buffer stocks and open market sales, stock limits under the Essential Commodities Act, 1955, trade measures and lower indirect taxes. The two arms work best together.

Exam traps

Recap

Practice questions

Q1. The Wholesale Price Index in India is compiled by:

  1. The National Statistics Office
  2. The Labour Bureau
  3. The Office of the Economic Adviser, DPIIT
  4. The Reserve Bank of India
Show answer

Answer: C. The Office of the Economic Adviser, DPIIT

The Office of the Economic Adviser in DPIIT, Ministry of Commerce and Industry, compiles the WPI. The NSO compiles the CPI, the Labour Bureau the CPI-IW and CPI-AL/RL, and the RBI compiles none of these indices.

Q2. Consider the following statements:
1. The current CPI series has 2024 as its base.
2. In the current CPI series, food and beverages have a larger weight than in the 2012 series.
Which of the statements given above is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
Show answer

Answer: A. 1 only

Statement 1 is correct: the base is 2024=100. Statement 2 is wrong: the food and beverages weight fell from 45.86 to 36.75 per cent. So '2 only' and 'both' are wrong, and 'neither' misses statement 1.

Q3. Which one of the following indices is used to revise the dearness allowance of government employees?

  1. Wholesale Price Index
  2. Consumer Price Index for Industrial Workers
  3. Consumer Price Index for Agricultural Labourers
  4. GDP deflator
Show answer

Answer: B. Consumer Price Index for Industrial Workers

CPI-IW is used for dearness allowance. The WPI tracks wholesale goods prices, CPI-AL is used for agricultural minimum wages, and the GDP deflator converts nominal GDP to real GDP; none of these is the basis for dearness allowance.

Q4. Core inflation is calculated by excluding which of the following from the CPI?

  1. Services
  2. Food and fuel
  3. Manufactured goods
  4. Housing
Show answer

Answer: B. Food and fuel

Core inflation removes the volatile food and fuel components. Services, manufactured goods and housing all remain in core inflation, so the other options are wrong.

Q5. A situation of high inflation combined with stagnant output and high unemployment is called:

  1. Disinflation
  2. Reflation
  3. Stagflation
  4. Deflation
Show answer

Answer: C. Stagflation

This is stagflation. Disinflation is a falling but positive inflation rate, reflation is a policy push to lift prices and output, and deflation is a fall in the price level; none combines high inflation with stagnation.

Q6. Consider the following statements:
1. The inflation target under the RBI Act is determined once every five years.
2. The target for 2026-2031 was raised to 5 per cent CPI inflation.
Which of the statements given above is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
Show answer

Answer: A. 1 only

Statement 1 is correct under section 45ZA. Statement 2 is wrong: the target was retained at 4 per cent with a 2-6 per cent band for 1 April 2026 to 31 March 2031. So '2 only' and 'both' are wrong, and 'neither' misses statement 1.

Q7. With reference to the Monetary Policy Committee, which of the following statements is correct?

  1. It is chaired by the Union Finance Minister.
  2. Its external members may be reappointed for a second term.
  3. It must meet at least four times a year.
  4. Its decisions require a unanimous vote.
Show answer

Answer: C. It must meet at least four times a year.

The RBI Act requires at least four meetings a year. The MPC is chaired by the RBI Governor, not the Finance Minister; external members cannot be reappointed; and decisions are by majority, with the Governor's casting vote in a tie, not by unanimity.

Q8. Which of the following would usually lose from inflation that is higher than expected?
1. A pensioner receiving a fixed money pension
2. A borrower who took a loan at a fixed interest rate
3. A bank that lent at a fixed interest rate
Select the correct answer using the code given below:

  1. 1 and 2 only
  2. 1 and 3 only
  3. 2 and 3 only
  4. 1, 2 and 3
Show answer

Answer: B. 1 and 3 only

The pensioner and the lending bank lose, because the money they receive buys less. The borrower gains, since the loan is repaid in rupees of lower value, so every option that includes 2 is wrong.

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