• UGI USER
  • Jul 23, 2024
  • 3 Likes
  • 0 Comments

CEA SUGGESTS EXCLUDING FOOD PRICES FROM INFLATION TARGET

Why in the news?

  • India’s inflation is expected to align with the 4% target by 2025-26.
  • Chief Economic Adviser (CEA) V. Anantha Nageshwaran suggests an inflation targeting framework that excludes volatile food prices.
source:bussinessstandard

About Chief Economic Adviser (CEA):

  • The CEA is a Secretary-equivalent post in the Government of India.
  • Heads the Economic Division, Department of Economic Affairs, Ministry of Finance.
  • Ex-officio cadre controller of the Indian Economic Service.
  • Reports directly to the Minister of Finance.
What is Inflation?

  • Defined by the IMF as the rate of price increase over time.
  • Reflects rising living costs and indicates price increases for goods/services.
  • Significant impact in India due to economic disparities and large population.

Measuring Inflation in India:

  • Consumer Price Index (CPI): Measures retail price changes for a basket of goods and services; base year 2012.
  • Variants: CPI-IW, CPI-AL, CPI-RL, CPI-UNME
  • Used by Monetary Policy Committee (MPC)
  • Wholesale Price Index (WPI): Tracks price changes at the wholesale level; includes primary articles, fuel, power, and manufactured products; base year 2011-12.
  • Producer Price Index for Manufacturing (PPIM): Measures price changes for domestic manufacturing output.

What is a Price Index ?

  • A Price Index measures average price changes over time for goods and services.
  • It is referenced to a base year, set as 100.
  • Formula: (Current Year’s Price / Base Year’s Price) x 100.
  • Used to measure inflation levels.