What is inflation? How to calculate YOY inflation%?

General
1

What is the basis for calculation of inflation? (Ex, Goods prices, land cost, foreign investments etc, (be specific please))

If we get 9.5% interest from FDs and inflation of 10% that year, does that mean we are in loss of capital?

Is there any formula or something to calculate inflation? Is this data released by govt? at what frequency?

P.s: I have already read varisty Module 1, please dont provide pointers there

Other than investing in stocks any other way to beat the inflation?

2

Inflation calculation is quite complex, but the underlying premise is to take the rate of change of cost of goods and measure it on the basis of the weight assigned to these goods. While doing so, Government literally considers all goods. Check out this ‘weighting diagram’ for CPI calculation -

http://164.100.34.62:8080/CPIIndex/Weights.aspx

At 9.5% interest, and 10% inflation you are bound to lose 0.5%. However this loss in not tangible, hence its hard for people to believe this.

Govt releases this data on a monthly basis (sometime between the 12th to 14th). But this is not real time, meaning in Jan the Govt will release Dec data, and in Feb they will release Jan data. Keep a tab on this for the same - http://mospi.nic.in/Mospi_New/upload/cpi_press_release.htm

1 Like
3

The first link is not accessible to me, Karthik.
Do I need to do something to access it?

4

Try this goto http://mospi.nic.in/Mospi_New/site/home.aspx on the left hand side panel, click on consumer price index, and then again on the left had side panel click on weights. Hopefully that should work.

5

Thanks, that works gr8.
So is CPI (consumer price index) is synonymous to inflation?
I mean are they one and the same?

6

Yes, between the two i.e WPI & CPI, CPI is more applicable to trading circumstance.