Inflation Measurement in India

In India, inflation is measured primarily through the Wholesale Price Index (WPI), also known as the Wholesale Price Index (WPI). The correct answer to this question is option 'D' - Wholesale Price Index.

Explanation:

1. Introduction to Inflation Measurement:
Inflation refers to the sustained increase in the general price level of goods and services in an economy over a period of time. It is an important economic indicator as it affects the purchasing power of individuals and the overall stability of the economy. To measure inflation accurately, various indices are used that track price changes in different sectors of the economy.

2. The Wholesale Price Index (WPI):
The Wholesale Price Index (WPI) is a widely used measure of inflation in India. It measures the average change in the price of goods at the wholesale level over a period of time. It is calculated by the Office of Economic Adviser, Ministry of Commerce and Industry, Government of India.

3. Calculation of WPI:
The WPI is calculated based on the price changes of a basket of goods and services that represent the wholesale market. It includes commodities like food, fuel, manufactured products, and others. The prices of these commodities are collected from selected wholesale centers and markets across the country. The WPI is calculated on a weekly basis and is based on the base year 2011-12.

4. Significance of WPI:
The WPI is considered an important measure of inflation in India because it reflects price changes at the wholesale level, which have a cascading effect on retail prices. It provides an indication of inflationary pressures in the economy and is used by policymakers, economists, and analysts to monitor and analyze inflation trends. The Reserve Bank of India (RBI) also takes the WPI into account while formulating monetary policy.

5. Limitations of WPI:
While the WPI is a widely used measure of inflation in India, it has some limitations. Firstly, it does not capture price changes at the retail level, which directly affect consumers. Secondly, it gives more weightage to manufacturing products and less weightage to primary products, which may not accurately reflect the price changes in the economy. To overcome these limitations, the Consumer Price Index (CPI) is also used as a measure of inflation in India, which focuses on retail prices.

In conclusion, the Wholesale Price Index (WPI) is the primary measure of inflation in India. It reflects price changes at the wholesale level and is widely used by policymakers and economists to monitor and analyze inflation trends in the country.