A sustained rise in the general level of prices in an economy, which reduces the purchasing power of money; in India it is measured mainly by the Consumer Price Index (CPI), which the RBI targets at 4% ±2%.
Rising prices are as old as money, but the modern idea of inflation as a policy target is recent. Through the planning era India tracked the Wholesale Price Index (WPI), because it was available weekly and reflected producer prices that the government cared about. Retail inflation was measured by several separate CPIs for industrial workers, agricultural labourers and rural labourers, each for wage indexation rather than for macro policy.
Two changes reshaped the subject. In 2011 the then Central Statistics Office released an all-India CPI (Rural, Urban and Combined) covering households broadly. Then, after years of high and volatile food inflation between 2009 and 2013, the Urjit Patel committee (2014) recommended that the RBI target CPI inflation. The RBI Act was amended in 2016 to create flexible inflation targeting with a statutory Monetary Policy Committee. Since then, "inflation" in Indian policy debates almost always means year-on-year change in the combined CPI.
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