What is Inflation Rate?

The buzz word used by media frequently in their news editions, even without expecting whether the common man will understand this term or not. In an attempt to throw some light on this technical jargon, i have decide to write this blog. Inflation rate is calculated by two methods, wholesale price index, consumer price index. Whole price index is calculated on 30 items, on the whole sale price margins of these 30 products. This method of calculation is widely used across most of the countries, even in India, whenever the media mentions about the Inflation Rate, it is the Wholesale price index. Consumer Price Index is calculated on the same 30 products, but on the price at which the end user pays to get the same.

Having said this, what does it mean to a common man. The 30 products used for indexing the Inflation Rate, includes most of the products used by a human on a daily basis, like fuel, rice, wheat etc.. What does it mean if the inflation stands low and what it does if the inflation rate goes up? this is the most common question asked by many people when people see in the news channels. We will discuss on this in near future.