Inflation

Inflation edged 12.01%

NEW DELHI— India's annual inflation breach

es more than 12 percent
for the first time in over 13 years, fuelled by higher international crude
oil prices to domestic prices as well as continued increase in the
prices of iron and steel, basic heavy inorganic chemicals, machinery
and machinery tools, oilseeds/edible oils/oil cakes and raw cotton
on account of strong demand, international commodity price pressures
and lower domestic 2007-08 rabi production of oilseeds. The seasonal
hardening of vegetables prices as well as increase in the prices of
textiles has also contributed to the rising inflation during 2008-09 so far.

Inflation may peak in November-December and slip into single-digit by March 2009.
The current price situation, may lead to the another round of monetary tightening.

Planning Commission deputy chairman Montek Singh Ahluwalia said inflation would
fall below the 10 percent mark by this fiscal-end.

“Inflation is expected to moderate below the double-digit mark by the end of the current
fiscal,” Ahluwalia told reporters on the sidelines of a function.

Finance Minister P. Chidambaram Wednesday told a gathering of Congress spokes
persons that inflation would take a minimum six to nine months to moderate.

In his address at the conclusion of the trust motion July 22, the prime minister had
listed nine main priorities for his government, in which inflation control was ranked first.

How does India and developed countries calculate inflation?

• India uses the Wholesale Price Index (WPI) to calculate inflation rate.
• Most developed countries use the Consumer Price Index (CPI) to calculate inflation.

Wholesale Price Index (WPI)

WPI is the index that is used to measure the change in the average price level of goods
traded in wholesale market. In India, a total of 435 commodities data on price level is tracked
through WPI

Consumer Price Index (CPI)

CPI is a statistical time-series measure of a weighted average of prices of a specified set of
goods and services purchased by consumers. It is a price index that tracks the prices of a
specified basket of consumer g oods and services, providing a measure of inflation.

India annual inflation rate table from 1999 to 2007

Year	% of change
1999	4.7
2000	4
2001	3.8
2002	4.3
2003	5.4
2004	3.8
2005	4.2
2006	4.2
2007	5.3