The main goal of these savings and investments are to meet future financial requirements. Investors do savings and investments with an aim to grow their money. Purchasing power is when the same amount of money will buy less of a product as time passes. This is called the falling purchasing power of the currency. With the same INR 25, one can get only half a litre of milk in 2020. Now the same litre of toned milk costs INR 45 in 2020. A litre of toned milk used to cost INR 25 in the year 2010. Inflation can be better explained with an example. It calculates the price change of all these 299 goods and services by taking a weighted average value of each of them. CPI is determined using a basket of 299 commodities. The percentage change in CPI over a period of time is the inflation over that period for consumer goods. In India, the Consumer Price Index (CPI) replaced the Wholesale Price Index (WPI) in the year 2013 as a measure of inflation. While CPI measures retail level price changes (retail inflation).ĬPI is one of the most widely used indicators for identifying inflation or deflation in an economy. WPI measures wholesale level price changes. The measures of inflation are the Consumer Price Index (CPI) and Wholesale Price Index (WPI). Also, it shows the fall in the purchasing power of a rupee.
In simple terms, it is a rise in price levels of goods and services of daily use.
Inflation is a measure of the rate of change in prices of selected goods and services.
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