India's economic growth is measured in terms of Gross Domestic Product (GDP) as reduced by Inflation. So we grew — according to the recent CSO release — a whopping 20% on GDP last year (2010-11), and because inflation was, well, pretty high, we grew a only a "real" 8.6% in 2011. How can you grow 20% but only really grow 8.6%? Inflation eats up the rest — and in a way "deflates" the GDP.
This year, the GDP deflator is at 11%+. We have had only six higher figures in the past since 1961, and this year is the highest since 1991 (13.73%). But can you really rely on it?
The GDP deflator is calculated in a complex way, but according to Deepak Mohanty, Executive Director at RBI, much of that is based on inflation of the WPI — or the Wholesale Price Index. This is the measure of Wholesale prices of commodities and manufactured goods across the country, released monthly.
There are multiple price indexes in India: The WPI and four different indexes of Consumer Price Inflation (CPI). This isRead More »from India’s Inflation Kool-Aid