BANGALORE:  One of the popular topics from Indian Economy is none other than Inflation. Since inflation affects every citizen of the country, however rich or poor, it is a crucial determinant of a country’s economic and social progress. The term ‘Inflation’ refers to “a rise in the general level of prices”.

 It is an important factor to assess the economy of any nation. In India inflation is calculated by using the Wholesale Price Index (WPI). But this system is considered backward as compared to the Consumer Price Index (CPI), a method that is used by the developed countries to calculate inflation.

Let’s find out different types of inflation that affects our finances in daily basis:

1. Wholesale Inflation

Wholesale or headline inflation is measured on the basis of the changes in wholesale price index (WPI). Since it is based on the wholesale prices, it helps the government to spot the price rise in advance.

However, wholesale inflation lost its relevance after the government decided to change the frequency of reviewing the index from a weekly to monthly basis, and the Reserve Bank of India shifted its monetary focus from wholesale to retail inflation.

2. Food Inflation

Food inflation is a subset of headline inflation and is expected to rise further when there is a deficit in the monsoon rains. According to financial experts controlling food inflation in India is a tough task, as the country is reliant of the monsoon rains for agricultural growth.

Over a period of years from vegetables, fruits, food grain and dairy products had constant increase in price. Thus it is essential for investors to take this inflation into account while planning their finances.