Inflation Mechanics & Monetary Metrics

📊 High-Yield Data & Statistical Fact Sheet

Cue Words	Notes
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.
Latest MPC Stance (June 2026)	RBI held the repo rate at 5.25% (unanimous 6-0), maintaining a 'neutral' stance. **FY27 CPI forecast raised** to **5.1%** (from 4.6%), with Q3 FY27 inflation projected near **5.9%** — close to the upper 6% tolerance limit, driven by fuel price hikes and West Asia conflict-linked supply disruptions. **FY27 real GDP growth forecast cut** to **6.6%** (from 6.9%), reflecting these inflation and external risks.
Retail Inflation Trough (Sep-Oct)	CPI inflation dropped to an 8-year low of 1.54% in September, easing further to 0.25% in October on falling food/fuel prices — below RBI's lower comfort band of 2%. Sub-2% prints signal supply outrunning demand, squeeze corporate margins, and raise the real burden of debt/interest for the private sector.
CPI Housing Index Reform (Proposed)	MoSPI's new series proposes monthly rent collection across both rural and urban markets (currently 6-monthly, urban-only). Dwelling sample to widen from 12 urban-only markets to 12 urban + 6 rural; employer-provided housing to be excluded as it distorts actual market rents. Multiple computation methods used since the last base revision to be unified into a single chain-index method; dwelling-type weights to shift from the NSS 69th-round Housing Condition Survey to Census 2011.
Expert Group Report on Comprehensive CPI Updation	2026 MoSPI released the **Report of the Expert Group on Comprehensive Updation of the Consumer Price Index (CPI)**, recommending adoption of the latest **COICOP 2018** (Classification of Individual Consumption According to Purpose) framework for the new **CPI 2024 series** base-revision exercise.
CPI Inflation — December 2025 Print	2026 All-India CPI headline inflation was **1.33%** (Y-o-Y, provisional) for December 2025 — remained **below RBI's lower tolerance limit for the 4th consecutive month**. **Consumer Food Price Index (CFPI)** inflation was **-2.71%** — negative for the **7th consecutive month**.
FIT Framework Review (Pre-March 2026)	Present 4% ± 2% mandate lapses March 2026; RBI has floated a discussion paper on the next framework. Live debate on targeting headline vs core CPI — food-price spikes aren't always purely supply-driven, especially when demand conditions are unchanged.
CPI Base Year Shift	Shifted to 2024 = 100, released by MoSPI on 12 Feb 2026 (replacing the 2012 series), based on **HCES 2023-24** consumption weights. CPI groups expanded from **6 to 12** under the **COICOP 2018** international classification; new items added (OTT subscriptions, rural house rent, value-added dairy, fitness equipment) while obsolete ones (VCR/DVD, tape recorders) were dropped. **First print under new series**: Retail inflation at a provisional **2.75%** (Jan 2026, YoY). MoSPI plans to revise the base **every 3–5 years** going forward using HCES data. 2026 **Sample expansion**: Sample markets increased from **2,295 to 2,860**. New: **12 online/e-commerce markets** added across 12 cities with population **>25 lakh** (2011 census) to capture e-commerce price trends — weekly price collection, monthly average used in CPI compilation.
Economic Survey 2021-22 — CPI/WPI Snapshot	2022 **CPI-Combined inflation** moderated to **5.2% (2021-22, Apr-Dec)** from **6.6%** a year earlier; **food inflation** averaged **2.9%** (down from 9.1%). 2022 **WPI inflation** rose to **12.5% (Apr-Dec 2021)** — attributed to the low base effect, pickup in economic activity, global crude/input prices, and high freight costs. 2022 **CPI-WPI divergence reversed**: retail inflation fell **8.0 percentage points below** wholesale inflation by Dec 2021, from a peak **+9.6 pp** divergence in May 2020.
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.
Money Multiplier Formula	**Money Multiplier** = Broad Money (M3) ÷ Reserve Money (M0). Propounded by Milton Friedman & Anna Schwartz (1963). Determinants: Currency-to-Deposit Ratio (public behaviour), Required Reserves-to-Deposits (central bank policy), Excess Reserves (commercial bank behaviour).
Classical vs Keynesian Interest Theory	**Classical (Real) Theory**: Rate of interest = equilibrium of savings (supply) & investment (demand for capital); a reward for thrift. **Keynes' Liquidity Preference Theory**: Interest = a purely monetary phenomenon; a reward for parting with liquidity, determined by demand & supply of money.
IS-LM Synthesis	**Hicks-Hansen Synthesis**: IS curve (Classical, downward-sloping: Investment-Savings) + LM curve (Keynesian, upward-sloping: Liquidity preference-Money supply); intersection = equilibrium interest rate & income.

4. FUNDAMENTALS: MICRO/MACRO & ECONOMIC SYSTEMS

Cue Words	Notes
Economics Definitions	**Adam Smith (Wealth Definition, 1776)**: Study of production & consumption of wealth (*Wealth of Nations*). **Marshall (Welfare Definition, 1890)**: Study of man in ordinary business of life; wealth as means to welfare. **Robbins (Scarcity Definition)**: Science studying human behaviour as a relationship between unlimited ends and scarce means with alternative uses.
Microeconomics vs Macroeconomics	**Microeconomics**: Behaviour of individual entities — firms, households, markets; determines prices via supply-demand (Adam Smith's foundation). **Macroeconomics**: Economy-wide aggregates — GDP, unemployment, price indices; founded by J.M. Keynes (*General Theory*, 1936) post Great Depression.
Three Fundamental Economic Questions	**What** to produce, **How** to produce, **For Whom** to produce — every economic system (market/command/mixed) must resolve these.
Market vs Command vs Mixed Economy	**Market/Capitalistic Economy**: Prices, profits, private decisions determine what/how/for whom; extreme form = *laissez-faire* (no govt interference). **Command/Socialistic Economy**: Government owns means of production & directs output/distribution (e.g., erstwhile USSR). **Mixed Economy**: Blend of both — India has been mixed since planning began (public + private + joint sector).

5. SUPPLY, DEMAND & MARKET EQUILIBRIUM

Cue Words	Notes
Law of Demand & Law of Diminishing Marginal Utility	Price ↑ (ceteris paribus) → Quantity demanded ↓, via **substitution effect** (cheaper alternatives) and **income effect** (reduced real income). **Diminishing Marginal Utility**: Each additional unit consumed yields progressively lower satisfaction.
Exceptions to the Law of Demand	**Veblen Goods**: Demand rises with price (conspicuous consumption — luxury/designer goods); named after Thorstein Veblen. **Giffen Goods**: Inferior goods where demand rises with price due to income effect dominating (Sir Robert Giffen; classic case — Irish Potato Famine). **Necessities**: Price-inelastic demand (essential medicines, staples like salt/sugar).
Market Equilibrium	Price/quantity where Quantity Demanded = Quantity Supplied; also called the market-clearing price. Surplus → price falls; Shortage → price rises.
Shift vs Movement Along Curve	**Shift in curve**: Caused by non-price factors (income, population, related-good prices, tastes, technology, input costs, govt policy). **Movement along curve**: Caused only by the good's own price change. Price↑ & Quantity↑ together ⇒ demand curve shifted right; Price↑ & Quantity↓ ⇒ supply curve shifted left.

1. STRUTTING THE INFLATION CLASSIFICATIONS

Cue Words	Notes
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)

Cue Words	Notes
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

Cue Words	Notes
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.
Hyperinflation & Iran Toman Reform (2020)	**Hyperinflation**: Extreme price rise (>50%/month), rendering paper currency worthless as store of value (e.g., Hungary 1946, Zimbabwe 2004-09, Venezuela 2018). **Iran Currency Reform (2020)**: Replaced Rial with **Toman** (1 Toman = 10,000 Rials; 100 Gheran = 1 Toman) to counter hyperinflation.
WPI Component Weights (Base 2011-12)	**Manufactured Products**: **64.23%** (highest weight). **Primary Articles**: **22.62%** (increased from 20.12%). **Fuel & Power**: **13.15%**. **WPI Food Index**: Published by DPIIT since 2017 to track producer-level food inflation.
CPI-Combined Weights (Base 2012 / 2024)	**Food & Beverages**: **45.86%** (Rural: 54.2%, Urban: 36.3%). **Miscellaneous**: **28.32%** | **Housing**: **10.07%** (*Excluded from CPI Rural*). **Fuel & Light**: **6.84%** | **Clothing & Footwear**: **6.53%** | **Paan/Tobacco**: **2.38%**. **CPI Food Index**: *Cereals & Products* carries highest weight (**34.2%**).
FAO Food Price Index (FFPI)	Monthly index released by FAO (UN) tracking 5 commodity groups: (1) Cereals, (2) Vegetable Oils, (3) Dairy, (4) Meat, (5) Sugar.
Producer Price Index (PPI - Goldar Committee 2014)	Measures price changes from producer perspective (excludes net indirect taxes & trade margins). Includes goods and services, eliminating multiple-counting inherent in WPI. Recommended by B.N. Goldar Committee (2014) to replace WPI.
Urjit Patel Committee (2014) FIT Justification	**5-Point Rationale for Inflation Targeting**: (1) Negative real interest rates, (2) Eroded external competitiveness, (3) High gold imports widening CAD, (4) Currency depreciation, (5) Rising income inequality. **Why CPI over WPI**: WPI ignores services (~60% of GDP), whereas CPI-C reflects retail household cost of living.
Housing Price Index (HPI)	Published by RBI (Base 2010-11) tracking property transaction prices across 10 major Indian cities.
Administrative Measures & Price Stabilisation Fund (PSF)	Essential Commodities Act 1955 & Prevention of Black-marketing Act 1980. Pulses buffer stock expanded to **20 Lakh MT**. **Price Stabilisation Fund (PSF)**: Maintains strategic buffer stocks of agri-horticultural commodities (pulses, onions) to moderate retail price volatility.
WPI vs CPI Divergence Trends	**WPI vs CPI Divergence**: Occurs when wholesale and retail inflation move in opposite directions (e.g., WPI turning negative due to global commodity drops while CPI-Combined spikes due to food supply shocks). **WPI Dynamics**: Driven primarily by volatile global input costs (crude oil, metals) and fuel & power prices. **CPI Dynamics**: Driven heavily by high food & beverage weights (~45.86%), agricultural supply bottlenecks, and retail perishables. **FIT Target Compliance**: CPI-Combined has consistently remained within the **4% ± 2%** target band since 2015, except during severe supply shock periods.

6. KEYNESIAN VS MONETARIST THEORY & KEY TERMINOLOGY (RAMESH SINGH)

Cue Words	Notes
Pre-1970s (Keynesian) View	**Demand-Pull**: Mismatch between demand & supply (demand ↑ or supply ↓); Keynesians prescribed spending cuts — higher taxes, lower govt expenditure. **Cost-Push**: Rise in factor input costs (wages, raw materials); Keynesians prescribed price/income controls, moral suasion, curbing trade-union monopoly power.
Post-1970s (Monetarist) View	Monetarist school (post-1970s) held that both demand-pull and cost-push are ultimately monetary phenomena — "too much money chasing too little output." Cost-push is "not truly independent": any cost rise must be financed by extra money creation (wage revision, public borrowing, printing currency) or consumers simply couldn't sustain purchases at higher prices. Prescription: proper monetary policy (money supply, interest rates, public borrowing control) rather than price/wage controls.
Three Govt Measures to Check Inflation	**Supply-side**: Import goods in short supply (short-term, e.g., onion imports); raise production (long-term). **Cost-side**: Cut excise/customs duty on inputs (short-term); tech/process innovation (long-term). **Monetary**: Tighten CRR/Bank Rate/Repo to siphon money supply — ineffective for everyday-use goods (salt, onion) bought without credit; effective for credit-driven demand (cement, steel).
Inflationary Gap & Deflationary Gap	**Inflationary Gap**: Govt spending exceeds national income (fiscal deficit) — extra money creation pushes prices up. **Deflationary Gap** (Output Gap): Govt spending falls short of national income (fiscal surplus) — signals general demand slowdown.
Inflation Tax / Seignorage	Government's power to print & circulate currency (deficit financing) acts as an implicit tax on currency holders, since inflation erodes money's value — hence "inflation tax," synonymous with seignorage.
Inflation Spiral (Wage-Price Spiral)	Self-reinforcing cycle where wages push prices up and prices pull wages up; first identified in the US economy in 1935.
Inflation Accounting & Inflation Premium	**Inflation Accounting**: Adjusting corporate profits for inflation's distorting effect to find "real" profit. **Inflation Premium**: Gap between nominal and real interest rate; lenders raise nominal rates to offset this (India, July 2003, inflation >7%).
Wage Inflation	A general rise in goods prices that is preceded by, and results from, a prior increase in wages — the wage-driven leg of the wage-price spiral.
NAIRU (Non-Accelerating Inflation Rate of Unemployment)	Friedman & Phelps (early 1970s) challenged the Phillips Curve: trade-off is only short-run; at NAIRU, inflation and wage pressures neutralise, so no tendency for inflation to change — the lowest sustainable unemployment rate without upward inflation pressure.
Historical Comfort-Zone Benchmarks	**Chakravarty Committee (1985)**: 4% acceptable. **GoI (1997-98)**: 4-6% range accepted (citing 0-3% world average then). **C. Rangarajan**: 6-7% initially, tapering to 5-6%. **Tarapore Committee (CAC)**: 3-5% for 1997-2000. Post-2003: 4-5% treated as the informal "healthy range" before formal FIT (2016) fixed 4% ± 2%.

7. BUSINESS CYCLE: PHASES & INDICATORS

Cue Words	Notes
Four Phases (Ramesh Singh)	Business/trade cycle = fluctuation of economic activity between Depression and Boom, with Recession and Recovery as intermediate stages (stagnation/slowdown as further sub-stages).
Depression	Extremely low aggregate demand; comparatively low inflation; unemployment rising fast; forced labour-cuts/retrenchment. Occurred globally only once — Great Depression, 1929; triggered Keynesian-style deficit financing & monetary management as remedies.
Recovery	Upturn in aggregate demand + production; inflation moves upward (cheaper borrowing); new employment created. Tools: tax breaks, interest cuts, salary hikes. India, 1997-2002 recovered from slowdown/recession this way.
Boom	Accelerated, prolonged demand rise exceeding sustainable output; economy "overheats"; inflation trends upward; risk of shortage of investible capital, falling savings, seller's market. India, 2002-03/mid-2007: inflation peaked near 8%, Govt acknowledged overheating.
Recession	Mild form of depression (same traits minus forced labour-cuts, which are here "voluntary"): falling demand, low/falling inflation, rising unemployment, industries resort to price cuts. India, 1996-97: triggered by South East Asian Currency Crisis; recovered by 2001-02 via tax cuts, 5th Pay Commission wage hikes, cheap money policy.
Growth Recession	Economy still growing (positive real GDP) but so slowly that job losses outpace job creation — "feels" like recession despite expansion. Coined for US 2002-03; revived post-2010 as "double-dip recession."
Why Economies Fluctuate (Causes)	Economic instability/uncertainty discouraging investment; lack of creative destruction (innovation) causing slumps; anti-inflationary policies timed near elections; unforeseen disasters/shocks.

8. INDEX METHODOLOGY: NSO DEFLATOR CONSTRUCTION & FOOD SUB-INDICES

Cue Words	Notes
WPI Food Articles Weight	**Food Articles** carry a **24.4%** weight within the WPI basket (a sub-set of the 22.62% Primary Articles group) — distinct from CPI's much larger 45.86% Food & Beverages weight, explaining why WPI food inflation and CPI food inflation often diverge.
Consumer Food Price Index (CFPI)	Tracks change in retail prices of food items only, released monthly for rural, urban, and combined (all-India) — a food-focused companion to the broader CPI, distinct from the WPI Food Index (producer-level, published by DPIIT).
NSO's Mixed Current/Constant Price Methodology	Under the production (value-added) approach, NSO estimates GVA differently by activity: (1) some activities estimated at **current prices**, with constant-price figures derived via a price indicator; (2) others estimated at **constant prices** first, with current-price figures derived via a price indicator; (3) a few activities have volumes estimated **independently**. The price indicator used for these current↔constant conversions is generally **WPI or CPI** (aggregate or disaggregated) or a mix of both — this reliance on WPI/CPI as a *proxy* deflator (absent a dedicated producer price index) is precisely the IMF's data-quality criticism of India's NAS. **Implicit GDP/GVA Deflator** = ratio of current-price to constant-price GVA/GDP estimate, reflecting economy-wide inflation across all goods and services; published **quarterly by NSO** (per RBI).

9. FUNDAMENTALS CHECK — INFLATION BASICS & MPC COMPOSITION

Cue Words	Notes
Inflation — Basic Definition & Formula	**Inflation**: A sustained, general rise in the price level of goods & services in an economy over time, causing each unit of currency to buy fewer goods/services (fall in purchasing power). **Formula**: Inflation Rate (%) = [(Price Index in Current Period − Price Index in Base/Previous Period) ÷ Price Index in Base/Previous Period] × 100.
Demand-Pull Inflation — Plain Definition	Occurs when **aggregate demand exceeds aggregate supply** at existing prices — "too much money chasing too few goods." **Basic causes**: rise in money supply, increased government spending, tax cuts, export demand surge, population/income growth.
Cost-Push Inflation — Plain Definition	Occurs when **production costs rise** (wages, raw materials, energy) and producers pass the burden to consumers via higher prices, independent of demand conditions. **Basic causes**: oil/input price shocks, wage-push by unions, imported inflation (rupee depreciation raising import costs), indirect tax hikes.
Monetary Policy Committee (MPC) — Composition	Statutory body under **Section 45ZB, RBI Act 1934** (inserted by the 2016 amendment operationalising the Monetary Policy Framework Agreement, Feb 2015). **6 members**: 3 ex-officio from RBI (**Governor as Chairperson**, Deputy Governor in charge of monetary policy, one RBI-nominated officer) + **3 external members** appointed by the Central Government for a 4-year term (non-renewable). **Voting**: Each member has one vote; decision by majority. In case of a **tie, the Governor holds a second/casting vote**. Mandated to meet at least **4 times a year**; must publish resolution and minutes.
MPC — Statutory Source & Quorum (alternate framing)	Also described as a statutory body created via the **Finance Act, 2016** (the amendment vehicle that inserted the MPC provisions into the RBI Act). **Government sets the inflation target every 5 years.** MPC must meet **at least 4 times a year**; **quorum for a meeting = 4 members**. **Terms & conditions of appointment** of members are laid down by the **Central Government**.

10. WPI — CONSTRUCTION, GROUPS & PUBLISHER

Cue Words	Notes
What WPI Measures	Calculates price changes at the point of bulk transactions, and may include some taxes and distribution costs. The WPI computed on the 2011-12 base year does NOT include taxes, in order to remove the impact of fiscal policy — hence the present WPI ≈ PPI (as practised globally).
WPI — Three Major Groups	Covers commodities of 3 major groups: (1) Primary Articles, (2) Fuel and Power, (3) Manufactured Goods.
WPI Base Year (older series)	**Base year: 2011-12** *(older series — superseded: the DPIIT working group under Ramesh Chand is shifting the WPI base to **2022-23** and transitioning toward a Producer Price Index)*.
WPI — Publisher & Headline Role	Calculated by the **Office of the Economic Adviser (OEA), DPIIT, Ministry of Commerce & Industry**. **Was earlier used for Headline Inflation** — now **CPI** is used for that purpose.

11. CPI — SIX SUB-INDICES, PUBLISHERS & CONSUMER EXPENDITURE SURVEY

Cue Words	Notes
CPI — What It Measures	Measures changes in the price level of a basket of consumer goods and services bought by households.
CPI Base Year (older series)	**Base year: 2011-12** *(older series — superseded by the **2024 = 100** series released by MoSPI on **12 Feb 2026**, which replaced the 2012 series)*.
CPI — 6 Types & Their Publishers	**CPI-IW (Industrial Workers)** — by **Labour Bureau, Ministry of Labour & Employment**; base year revised to **2016** (from 2001). **CPI-AL (Agricultural Labourers)** — Labour Bureau; **MGNREGA wages are linked to this index**. **CPI-RL (Rural Labourers)** — Labour Bureau. **CPI (Rural)** — by **CSO in MoSPI** *(CSO since merged with NSSO into the NSO)*. **CPI (Urban)** — CSO/MoSPI. **CPI (Combined)** — CSO/MoSPI.
Source of CPI Weights — Consumer Expenditure Survey	The weight of items in CPI is drawn from the Consumer Expenditure Survey, conducted by NSSO every 5 years (older practice — the current 2024=100 series uses HCES 2023-24 weights, and HCES is now conducted every 3 years).

12. PPI, GDP DEFLATOR & THE INDUSTRIAL/BUSINESS INDEX FAMILY

Cue Words	Notes
PPI — Core Features	Calculates the **average change in prices received by the producer**. **Excludes indirect taxes**. **Removes the multiple-counting bias** inherent in WPI. **Includes goods as well as services.** **Weight of items in PPI is derived from Supply Use Tables** (contrast: CPI weights from Consumer Expenditure Survey/HCES).
GDP Deflator — Coverage & Frequency	Covers the entire range of goods & services produced in the economy. Available on a quarterly basis (released along with GDP data). Derived from Nominal / Real GDP; GDP itself calculated by CSO (older attribution — national accounts are now compiled by the NSO, formed in 2019 by merging CSO and NSSO).
Index of Industrial Production (IIP)	Indicates the **performance of various industrial sectors** of the economy. **Base year: 2011-12** *(as per this source; note the broader statistical-system move to newer base years)*. Weights: **Manufacturing (77%) > Mining (14%) > Electricity (8%)**. Calculated by **NSO** (earlier CSO, but now NSO after the merger of CSO and NSSO), **every month**, released around the **12th-13th of the month**.
Index of Eight Core Industries — Full Weight List	Constitutes **40% of the weight of items in IIP**; a **production volume index**; gives an **advance indication released before IIP**. Released **monthly by the OEA, DPIIT, Ministry of Commerce & Industry**. **Refinery Products (28%)** > **Electricity (20%)** > **Steel (18%)** > **Coal (10%)** > **Crude Oil (9%)** > **Natural Gas (7%)** > **Cement (5%)** > **Fertilizers (2.6%)**. Recently, **tobacco was removed and palm oil added** to the list.
Purchasing Manager's Index (PMI)	Indicator of business activity in the manufacturing and services sectors. Compiled by the Japanese firm Nikkei and Markit Economics. A survey-based measure — asks respondents about changes in their perception of key business variables. Released at the start of every month ⇒ a good leading indicator of economic activity.

13. INFLATION MISCELLANY — INDEXED BONDS, BOTTLENECK INFLATION & PRICE MANAGEMENT

Cue Words	Notes
Inflation Indexed Bonds (IIBs)	Provide **inflation protection to both principal and interest payments** ⇒ give the investor a **constant real return irrespective of inflation levels**. **Eligible for SLR status.** **WPI is used** for indexing IIBs; there has been talk of releasing IIBs indexed to **CPI**.
Bottleneck Inflation	Arises when supply falls drastically while demand remains at the same level.
Misery Index	**Misery Index = Unemployment Rate + Inflation Rate** ⇒ shows the extent of **stagflation**.
Fiscal Drag	Inflation pushes incomes into a higher tax bracket (real tax burden rises without any change in tax rates).
Price Stabilisation Fund (PSF) — Origin Details	**Constituted in 2014-15** for containing **extreme volatility in prices of agri-horticultural products** like **onion, potato and pulses**. Purpose: maintain a **strategic buffer** and **discourage hoarding and unscrupulous speculation**.
Philips Curve (source restatement)	Inflation and unemployment have a stable and inverse relationship; fails in the long run under stagflation (high unemployment + high inflation) ⇒ becomes a vertical line.