3/20/13 [Economy Q] Headline vs Core Inflation Difference « Mrunal

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[Economy Q] Headline vs Core Inflation Difference

Navjot asked

What is headline inflation? How is it different from Core inflation?

Headline inflation

It is the figure we get by Wholesale Price indexWholesale price index (WPI), has three components.

1. Primary items (food, milk, eggs etc.)2. Fuel (kerosene, coal, petrol, diesel, gas,electricity etc)3. Manufactured items (textiles, plastic, leather, metal products etc)

Core inflation

it is Headline inflation minus food and fuel prices.The food and fuel prices keep changing based on season and external factors. Hence, headline inflation gives a very volatilenumber.The policymakers (RBI and Fin.Min.), cannot use this number to make future predictions or long-term policies, so they alsokeep a separate watch on Core-Inflation number.

How do we measure inflation in India?

Central Statistical Organisation (CSO) under the Ministry of statistics and program implementation calculate the WPI, CPI.

The same org. also responsible for compiling Index of industrial production (IIP)

Related to this

Phillips curve

If the unemployment rate is LOW, Inflation rate will be HIGH.

Stagflation

Both unemployment and inflation rates are high and growth rate is low.

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5 comments to [Economy Q] Headline vs Core Inflation Difference

mittyReply to this comment

Headline inflation is calculated with respect to privious year only but core inflation needs base year value…is it rite?

Raj

Reply to this comment

Sir I have heard many ppl saying that it is not possible to be a UPSC topper by writing in a language other than english and hindi.Are thecandidates of regional language in some sort of disadvantage?????? Plz reply

vedant ojhaReply to this comment

sir what is the meaning of benign inflation?

RakeshReply to this comment

Generally its rate stays about 2-3%. Its good for economy. Benign is constructed from the root ‘bonus’= good.

[Economy] LIST of All Articles published by me to clear the basic concepts of Economy for anyrecruitment exam or interview « MrunalReply to this comment

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