Explain what is Inflation, and how is it measured by the government bodies?

Inflation is the overall increase in prices of goods and services throughout the economy over time. It is measured by comparing the prices of goods and services currently with the past price records.

The Wholesale Price Index (WPI) and the Consumer Price Index (CPI) are used in India, to measure inflation (CPI).

• In India, the wholesale price index (WPI) is the main measure of inflation. The WPI measures the price of a representative basket of wholesale goods. 
• CPI is a comprehensive measure used for the estimation of price changes in a basket of goods and services representative of consumption expenditure in an economy. The change in CPI gives a good indication of the overall inflation in the country.