Inflation is the overall general upward price movement in an Weighted averages of prices of a specified set of goods and services.

Food inflation rose to 11.81% on November 11, 2011 FYI :

Wholesale Price Index (WPI), which is based on the price prevailing in the wholesale markets or the price at which bulk transactions are made. The Consumer Price Index (CPI), which is based on the final prices of goods at the retail level. The WPI is used to measure inflation in India because of the non-availability of appropriate CPI Problems with WPI For many commodities like cars, wholesale markets may not exist. The WPI doesnt take the price of services into consideration, which now accounts for 60 percent of the GDP

Inflation is a part and parcel of growth Inflation better than recession as it motivate people Inflation reduces the purchasing power of the money Goods expensive leading to decline in exports but Imports in India remaining more or less same puts burden on BOP Causes more burden to the poor people as major portion of income goes in basic necessities. Fiscal Deficit is 4.6 percent of GDP and Most economists now expect the fiscal deficit to rise above 5.5 percent of GDP. In India inflation is due to supply side constraints Support programs like Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) have contributed to the rise in food demand but the activities involved in it are not increasing agricultural productivity Better food storage systems like building proper warehouses Encouraging consumption of cheap substitute food like soya instead of expensive dal. Export of certain food grains like done for Onion Steps taken recently : Encouraging people to save by increasing saving deposit rate