Inflation is the rise in price levels of the commodities we use due to rise in price levels in the economy (consequent devaluation of the currency) and not because of improvements in the quality or quantity of the commodities.


A pencil which used to cost less than Rs 1 decades back, now costs more than Rs 10, without any value additions since then.

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The Central Statistical Office has categorised inflation indices as the consumer price index (CPI) and the wholesale price index (WPI), charting inflation on retail and wholesale prices of different commodities, respectively.

Inflation can occur due to the prices of commodities used in the production of final goods and services, such as rising oil prices affecting transport costs, or inflation could stem from demand surpassing supply, created by, say, an interest rate cut making credit available cheaply and boosting demand while supply remains limited in the short term.