Last updated: 3 October 2026
Inflation is a continuous rise in the general level of prices of goods and services. When prices rise, the purchasing power of money falls.
Types by cause
| Type | Cause |
|---|
| Demand-pull inflation | Demand for goods is higher than supply ("too much money chasing too few goods"). |
| Cost-push inflation | Cost of production rises: wages, raw materials, fuel. |
Types by speed
| Type | Meaning |
|---|
| Creeping | Prices rise slowly |
| Walking / trotting | Moderate rise |
| Galloping | Very fast rise |
| Hyperinflation | Prices rise out of control |
Related terms
| Term | Meaning |
|---|
| Deflation | A fall in the general price level. |
| Disinflation | The rate of inflation slows down, but prices still rise. |
| Stagflation | High inflation together with slow growth and high unemployment. |
| Reflation | Deliberate action to raise prices after deflation. |
| Headline inflation | Inflation of the whole basket, including food and fuel. |
| Core inflation | Inflation without the volatile food and fuel items. |
How inflation is measured in India
| Index | Released by | Note |
|---|
| Consumer Price Index (CPI) | National Statistics Office (MoSPI) | Prices paid by consumers; used by the RBI for its inflation target |
| Wholesale Price Index (WPI) | Office of the Economic Adviser, DPIIT (Ministry of Commerce and Industry) | Prices at the wholesale level; does not include services |
Inflation targeting
- Under the amended RBI Act (2016), India follows flexible inflation targeting.
- The target is 4% CPI inflation, with a band of 2% to 6%.
- The six-member Monetary Policy Committee (MPC) of the RBI decides the policy repo rate.
How inflation is controlled
- Monetary measures (by the RBI): raise the repo rate, CRR or SLR; sell government securities (open market operations).
- Fiscal measures (by the government): cut public spending, raise taxes, reduce the fiscal deficit.
- Supply measures: increase production, imports and storage; control hoarding.
Quick revision
- Inflation reduces the purchasing power of money.
- Stagflation = high inflation + low growth + unemployment.
- Core inflation excludes food and fuel.
- RBI target: 4% CPI inflation (band 2-6%).
- WPI does not cover services.
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