3/20/13

[Economy Q] Headline vs Core Inflation Difference Mrunal

[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 index Wholesale 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 volatile number. The policymakers (RBI and Fin.Min.), cannot use this number to make future predictions or long-term policies, so they also keep 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. Previous Posts
[Economic Survey Ch2] Demographic Dividend, Employment, Labour reforms, gist of [Economic Survey Ch1] Introduction, GDP FC MC relation (part 1 of 3) [Economic Survey Ch1] Investment, Savings, Gold Rush, Inflation Indexed Bonds (Part 2 of 3) [Economic Survey Ch1] Agriculture challanges, tax to GDP, steps by Government (part 3 of 3) [Economy] Rangarajan Gas Pricing, Production Sharing Contract (PSC), APM, NonAPM, issues, recommendations

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3/20/13

[Economy Q] Headline vs Core Inflation Difference Mrunal

APM, issues, recommendations

[Economy] EPFO: Compulsory UID, Investment in AAA Corporate bonds, Air India [Economy] Geographical Indication GI-tag: Features, Issues, benefits, Madurai Malli, Meerut scissors [Economy] Banking Ombudsman: Meaning, functions, appointment, reforms explained [Economy] Dedicated Freight Corridors (DFC), High Speed Rail Corridors, Rail Tariff Regulatory Authority, Issues, Reforms in Indian Railways [Economy] Banking Business Correspondents Agents (BCA): Meaning, functions, Financial Inclusion, Swabhimaan, Common Service Centres (CSC)

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

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mitty
Reply to this comment Headline inflation is calculated with respect to privious year only but core inflation needs base year valueis 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 the candidates of regional language in some sort of disadvantage?????? Plz reply

vedant ojha
Reply to this comment sir what is the meaning of benign inflation?

Rakesh
Reply 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 any recruitment exam or interview Mrunal
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