Inflation — CPI, WPI and What “Real” Income Means

Why One Formula Runs This Whole Chapter

Inflation is a sustained rise in the general price level. The goods do not get better; your money gets weaker. The same ₹100 buys less than it did last year.

Everything in this topic hangs off one formula:

Inflation rate = [(P₁ − P₀) ÷ P₀] × 100

where P₀ is the index in the base period and P₁ is the index now. Notice the denominator — you always divide by the *old* value. Dividing by the new one is the most common arithmetic slip in the exam hall.

Two 2026 changes make this topic unusually valuable right now. India rebased its CPI to 2024 = 100 in February 2026, and rebased its WPI to 2022-23 in June 2026 while introducing Producer Price Indices for the first time. Rebasing years are exactly the kind of fact paper-setters reach for in the year it happens.

1. In India, the Consumer Price Index (Combined) that the RBI targets is compiled and released by

2. The revised series of India's Wholesale Price Index released in June 2026 uses which base year?

3. The new Consumer Price Index series first released in February 2026 has which base year?

4. If the price index rises from 180 to 189 over a year, the rate of inflation is

5. Under the framework retained in March 2026, the RBI's CPI inflation target for April 2026 to March 2031 is

6. High inflation occurring together with stagnant output and high unemployment is called

7. Which measure of inflation covers all goods and services produced in the economy, making it the broadest of the three?

8. Using the rule of 70, at a steady inflation rate of 5% per year the general price level will roughly double in