Inflation Mechanics & Monetary Metrics
📊 High-Yield Data & Statistical Fact Sheet
| FIT Policy Anchor | - CPI-Combined (Rural + Urban) serves as nominal policy anchor since 2015 (Urjit Patel Committee). |
| FIT Target Band | - 4% ± 2% (2% to 6% band), managed by 6-member MPC. |
| CPI Base Year Shift | - Shifted to 2024 = 100 in 2026. Food & Beverages accounts for ~45% weight. |
| WPI & PPI Transition | - DPIIT working group (Ramesh Chand) shifting WPI base from 2011-12 to 2022-23, transitioning toward Producer Price Index (PPI). |
| IIP Sectoral Weights | - Manufacturing (77.63%), Mining (14.37%), Electricity (7.99%). |
| 8 Core Industries Top/Bottom Weights | - Refinery Products highest (28%), Fertilizers lowest (3%). Total Core weight: 40.27% of IIP. |
1. STRUTTING THE INFLATION CLASSIFICATIONS
| Creeping Inflation | - 2% to 3% (healthy growth stimulus). |
| Walking Inflation | - 3% to 10% (warning threshold for central bank). |
| Galloping Inflation | - 10% to 50% (severe macroeconomic instability). |
| Hyperinflation | - >50% per month (triggers currency collapse). |
| Demand-Pull Inflation | - Aggregate demand outpaces supply (loose money, high government spending). |
| Cost-Push Inflation | - Input cost supply shocks (oil shocks, wage hikes, indirect tax spikes). |
| Structural Inflation | - Supply-side bottlenecks (cold storage deficits, cartels). |
| Impact on Debtors | - Gain because debt is paid back in cheaper, less valuable currency. |
| Impact on Creditors | - Lose because real value of principal and interest falls. |
| Impact on Fixed-Income Class | - Lose because real purchasing power is eroded. |
2. COMPARING STATISTICAL TARGETS (WPI VS. CPI)
| WPI Characteristics | - DPIIT | Goods Only (697 items) | Wholesale Stage | Includes Imports. |
| CPI-Combined Characteristics | - NSO | Goods & Services | Retail Household Stage | Includes Imports (Base 2024). |
| GDP Deflator Characteristics | - NSO | All Domestic Output | All Production Stages | Excludes Imports. |
| Headline Inflation | - Total consumer price inflation (including volatile food and fuel). |
| Core Inflation | - Excludes food and energy components to reveal structural price trends. |
| CPI-Combined Target | - NSO (Base 2024) — Nominal policy anchor for FIT. |
| CPI-IW (Industrial Workers) | - Labour Bureau (Base 2016) — Used for Dearness Allowance (DA) calculations. |
| CPI-AL & CPI-RL | - Labour Bureau (Base 1986-87) — Tracks rural and agricultural labor prices. |
3. KEY CURVES & RELATED INFLATION PHENOMENA
| Phillips Curve | - Inverse short-run trade-off between inflation rate and unemployment rate. |
| Beveridge Curve | - Inverse relationship between unemployment rate and job vacancy rate. |
| Deflation | - Persistent general fall in price levels. |
| Disinflation | - Reduction in rate of inflation (prices still rising, but slower). |
| Reflation | - Deliberate monetary/fiscal stimulus to revive mild inflation. |
| Stagflation | - Stagnant growth + high unemployment + high inflation. |
| Skewflation | - Price spikes concentrated in specific sectors. |
| Shrinkflation | - Package size reduced while retail price remains constant. |
| Greedflation | - Corporate price hikes expanding margins beyond cost increases. |