Indias rank in Agro production

India ranks in production of 1. 2. 3. 4. 1. 2. 3. 4. 5. 6. 7. Milk, Pulses Jute And Jute-Like Fibres Tractors Rice, Wheat, Sugarcane. (Brazil is first) Groundnut, Vegetables, Fruits Cotton Production

First

Second

10th

in agricultural and food export

FYP Achievement: Agro

Plan Agro growth Actually achieved (%) 9th 10th 11th 2.5 2.4 3.6

FYP Targets

Under both 11th Five year plans and 12th Five year plan, government wanted average annual growth of 4 per cent in the gross domestic product (GDP) from agriculture and allied sector. But 11th Five year plan period, what we actually got was just 3.6%= 11th FYP target for Agriculture growth = not achieved.

Agro Employment

Agriculture, including allied activities= ~14 per cent of the GDP (2011), but their share in total employment ~58 (2001 Census). Meaning, Agricultures role in the countrys economy is quite crucial. As the country develops, the share of agriculture in its GDP decreases. But still, India needs fast agricultural growth for jobs, incomes, and the food security.

Crop Seasons
What Kharif Rice, cotton, maize and jute Wheat, Pulses When?

Sowing-june july. Harvested in Sept-Oct Sowing in Oct-Nov Harvesting February-March Summer season April-May-June

Rabi

Zaid

Fruits and vegetables

National Monsoon Mission

performance of Indian agriculture is still heavily dependent on rainfall and south west monsoon (June to September) And Last few years havent been good in terms of rainfall. More than 50% cultivated area in India depends on monsoon =>advance information about monsoon =very imp. Earth System Science Organization (ESSO) under Ministry of Earth Sciences has initiated the National Monsoon Mission during the 12th Five Year Plan. This will improve the reliability of monsoon forecasts help government to take necessary policy / administrative steps to support farmers and food management.

Sugar

India is the largest consumer of Sugar India is the second largest producer of sugar after Brazil. Sugar and Sugarcane are essential commodities under the Essential Commodities Act 1955. But Indian sugar sector suffers from policy inconsistency and unpredictability. Whenever there is big hue and cry over inflation, government would ban sugar export and allow duty free import of sugar. Due to this type of unpredictability in prices, over the years farmers have reducing growing sugarcane. For long, experts have demanded that Sugar industry should be deregulated and government should come into the picture only in situations where absolutely necessary. In this regard, Government had setup Rangarajan committee to look into the deregulation of Sugar industry. Entire report discussed in old article click me Rangarajan is the Chairman of the Economic Advisory Council to the Prime Minister. (also known as PMEAC=PMs Economic advisory council).

Ethanol Blending Program

Ethanol is produced from Molasses (=by product of sugar industry) Government allowed sugar companies to directly produce ethanol from sugarcane juice. National Policy on Biofuels announced.

2007

2008 1st Dec 2012 1st July 2013

phased implementation of ethanol blending with petrol. This was the deadline for starting ethanol blending. This is the new deadline for ethanol blending.

More on ethanol blending, discussed in old article, click me

Edible Oil

Though India is the largest producers of pulses in the world. However, 50 per cent of its domestic edible oil requirements are met through imports. Within imported edible oil, majority is palm oil, palmolein and soyabean oil. Why large import of Edible oil?

In the recent years, although domestic production of oilseeds = increased but still not sufficient to meet demand. competitive prices of edible oils in the international market Duty on imported edible oil is very low. Suggestion: India should have independent tariff policy on edible oil. Increase import duty and utilize that money for oilseeds development programs.

AGRICULTURAL INPUT
Seeds

Farmers typically rely on farm-saved seeds. But over use of such seeds = poor yield. Controversies surrounding GMO and Bt-brinjal. Mechanization

India is the world leader in tractor production with over 5 lakh tractors produced annually commercial banks reluctant to extend loans for bullocks. This has naturally led to an increase in farm mechanization. Problem: farm mechanization has so far been biased in favor of tractors (=need big farm) and been concentrated in irrigatedcommand areas (Punjab, Haryana, UP etc.) Small and marginal farmers in rainfed areas= ignored. Majority of farmers in India have small and marginal landholding. Therefore, it is uneconomic for them to individual own tractor, thrasher, combined harvester etc. agricultural machinery. Government needs to setup custom-hiring centres/high-tech machinery banks to help these small and marginal farmers.

There is also scope for introducing small machines that might be useful to meet their needs. Fertilizer

80% of our urea demand met through domestic production. But for potassic (K) and phosphatic (P) fertilizer, we largely depend on imports.

Fertilizers: NIP 2012

government has notified the New Investment Policy 2012 (NIP2012) in the urea sector. It will encourage investments in brownfield and greenfield projects. increase in domestic production capacity reduce import dependence reduce govt. expenditure on subsidy. ensure the long-term availability of gas required for expansion and greenfield/brownfield projects. If gas prices increase, then In the event of increase in gas prices provisions are made in the policy to protect the interest of investors. It + government is implementing direct cash transfer to the farmers for purchase of fertilizer, seeds etc.

Nutrient Based Subsidy (NBS)

Indian farmers use too much urea because 1) govt. gives subsidy hence its cheap 2) lack of awareness. But for optimal crop production, you need to use variety of fertilizers and not just Urea. So government came up with Nutrient Based Subsidy scheme. Under this scheme, Government gives subsidy on each grade of phosphatic and potassic (P&K) fertilizer depending upon its nutrient content. Government also give additional subsidy on secondary and micronutrients. Farmers pay only 58 to 73 per cent of the delivered cost of P&K fertilizers; the rest is borne by the Government of India in the form of subsidy.

Manufacturers/marketers are allowed to fix the maximum retail price (MRP)=> prices of these decontrolled products have double. But urea is not covered under the NBS scheme and government continues to provide subsidy on urea separately. Result=> farmers are relying more on Urea than on the new P&K fertilizers. So, while government had expected that NBS scheme would reduce the Urea consumption but actually reverse has happened.

Irrigation

Central Water Board

45

Initiate, coordinate schemes for Flood control, irrigation, drinking water supply etc. with state Governments. Command Area Development program. To bridge the gap between irrigation potential created and utilized. National perspective plan Interlink rivers to transfer water from water surplus basins to water deficit regions. National water Development agency to carry out survey research work for this. PM is the chairman Headed by Secretary, Water resources ministry. Reviews the progress in National water policy and reports it to the National water resources council. Accelerated Irrigation Benefit Programme (AIBP)

CAD

Mid 70s

NPP

80

National water resources council

83

National water board

90

AIBP

Mid90s

Central government provides assistance to States for finishing the incomplete irrigation schemes. Command Area Development Programme has also been amalgamated with the AIBP

In seven states 1. 2. 3. 4. 5. 6. 7. AP Mah Kar Raj TN Guj MP

Artificial recharge to ground water 2007 through dug wells

Agriculture Research and Education

ICAR

Indian Council of Agricultural Research (ICAR) Basic and applied research Mainly on problems of rainfed areas. State Agricultural Universities (SAUs) Generating required manpower for agro research, assistance. applied and research mainly on local problems

SAU

At present, India spends ~0.6% of its agricultural GDP on research and Development. For achieving 4% agro-growth target, R&D spending must be increased, atleast 2-3 times of current level.

ICAR: programs

National Agricultural Education Project National Agriculture Entrepreneurship Project Farmer FIRST

Improvement in Higher Agricultural Education Upgrade quality in State Agricultural Universities.

Self explanatory To enhance farmersscientist contact via Krishi Vigyan Kendra

Student Ready

Rural Entrepreneurship and Awareness Development Yojana (READY) As you can see entire phrase is in English except last word Yojana. Word Yojana is added only to get the alphabet Y so itd become a catchy phrase readY. These bureaucrates will do anything to harass an aspirant with these stupid schemes with catchy names. Anyways, this Student Ready is a one-year composite program Students who are pursuing their studies in various branches of agriculture will have to undergo rural awareness work experience to get hands on experience on the marketing skills etc. so they can become an entrepreneurs after completing the course.

NICRA CR Dhan 701 ASPIRE Garuda CIRCOT minicard KIRAN

National Initiative on Climate Resilient agriculture. Rice hybrid for irrigated and shallow lowlands. Agriculture Sciences Pursuit for Inspired Research Excellence Engine operated weeder for rice intensification. A machine for cottonyarn production Knowledge information repository in agriculture for North East. (if our bureaucrates put more time in

actual work rather than in designing such catchy terms and phrases for the schemes then North East would have became Switzerland by now.)

Agri-Innovate India ltd.

Corporate platform for ICAR. To commercialize agro technology To provide agro-consultancy in India and abroad. Software package designed by ICAR. To understand climate change impact on crop performance. Binjhapuri Ghumsuri Khariar Motu Banni Chilika Muzaffarnagari sheep usually produces single lamb, but ICAR has developed selective-breeding to produce twins and triplets. ICAR has improved the milk yied in Jakharana breed of goats. ICAR has done crossbreeding of Hampshire and Ghungroo pigs.

Weather cock

Cattle breeds

Buffalo breeds

Sheep

Goat

Pigs

The breeds of cows, buffalos, goats, pigs etc. are endless but above data is given in India 2013 Yearbook, hence important. ICAR: Fisheries

Wallago attu

Fresh water catfish. ICAR has developed technology for storing it. Fresh water fishes ICAR has developed techonology for storing it.

Rohu, catla

ICAR did the nutrient profiling of clam, crab and prawn and indicated that crab has a superior nutritive fat profile. Mahseer and trout= coldwater fishes. Saprolegnia is a pathological fungi that infects these cold water fishes (Mahseer and trout). ICAR found that herbs like Kali sarson and Lemon grass can be used to inhibit the growth of that fungi.

Procurement
In each season, government, 1. Announces Minimum Support Prices (MSPs) for major agricultural commodities 2. organizes purchase operations, through FCI, cooperatives etc. to ensure that prices do not fall below the MSP. Government of India decides the MSP after getting inputs from 1. Commission for Agricultural Costs and Prices (CACP) 2. views of state governments 3. view of central ministries

MSP is announced well ahead of the sowing season so that farmers can take informed decisions on cropping. (especially before elections). In last few years, government has substantially increased the Minimum support prices for many crops. (and some economists blame this for the rising food inflation). On behalf of government, FCI procures the foodgrains but if FCI makes any losses, then it is fully reimbursed by the central government.

This has led to substantial fiscal stress on the government.

The government also implements a Market Intervention Scheme (MIS) on the request of states/union territories (UTs) for horticultural and agricultural commodities, generally perishable in nature and that are not covered under the PSS

Missions

Agriculture is a state subject. Therefore, increasing agriculture production= primarily the responsibility of state government. And the central government supplements the efforts of state governments through centrally sponsored and central-sector schemes.

National Food Security Mission (2007)

was launched in 2007-8 with three major components, viz. Components NFSM-Rice NFSMWheat NFSMPulses

Target=Increase production by ___ million tones at the end of 11th FYP 10 8

+Restore soil fertility Enhance farm-level economy, employment opportunities;

National Mission for Sustainable Agriculture

One of the eight missions under National Action Plan on Climate Change (NAPCC) ensuring food security, enhancing livelihood opportunities, and contributing to economic stability at national level

Rashtriya Krishi Vikas Yojana (2007)

To make State governments increase State plan Expenditure on agro + allied sector.

Bringing Green Revolution to Eastern India (2011)

under the Rashtriya Krishi Vikas Yojana( RKVY) Intends to address the constraints limiting the productivity of rice based cropping systems in eastern India comprising seven states, viz. Assam Bihar Chhattisgarh Jharkhand Odisha Eastern Uttar Pradesh West Bengal. Rainfed Area Development Programme

1. 2. 3. 4. 5. 6. 7.

under the Rashtriya Krishi Vikas Yojana( RKVY) focus on small and marginal farmers and farming systems.

ISOPOM

Integrated Scheme of Oilseeds, Pulses, Oil Palm, and Maize Provides assistance for purchase of seeds, chemicals, equipment etc. During Twelfth Five Year Plan, it is proposed to replace this scheme with a new Mission on Oilseeds and Oil Palm.

National Horticulture Mission

ensuring forward and backward linkages through adopting a cluster approach creating value addition and better delivery mechanism to consumers through a cold chain system, a National Centre for Cold-Chain Development (NCCD)

Kisan Credit Card (KCC)

Started in 98 For short and medium term loan. + insurance in case of accidental death / disability. Revised in 2012 : Now old KCC passbook will be replaced with an ATM-cum-debit card. Farmers were granted post-harvest loans against negotiable warehouse receipts at commercial rates. the benefit of interest subvention has been extended to small and marginal farmers having KCC

Agro Insurance
1. National Agricultural Insurance Scheme (NAIS): By Agriculture Insurance Company of India Ltd. 2. Weather Based Crop Insurance Scheme: to insure farmers against adverse weather incidence

Challenge: Need to refine the current crop insurance system for unavoidable climatic conditions and pest epidemics.

Agro Marketing
Model act

Government of India prepared a model Agricultural Produce Marketing (Development and Regulation) (APMC) Act in 2003. many of the states are yet to adopt the Model Act uniformly. DMI

Directorate of marketing and inspection. It is an attached office under Agri ministry.

AGMARK

Agricultural produce (Grading & marketing) Act, empowers central Government to notify rules for quality and grades of agro produce. The standards notified under this act = known as AGMARK. AGMARK is voluntary in nature. FDI

Farmers access to markets is hampered by poor quality roads, lack of cold storage, rudimentary market infrastructure, and excessive regulation. Therefore government allowed foreign direct investment (FDI) in multi-brand retail and itll help in.(this tape has been repeated 50000 times so Ill not finish the sentence).

Radiation application in Food processing

By Department of atomic energy Place BRITs Radiation processing plant @Navi Mumbai Dose of radiation high Preservation of

Spices

BARCs KRUSHAK (Krishi Utpadan Sanrakshan Kendra) Near low Nasik

Onion, pulses, rawa and turmeric.

ATMA

Agricultural Technology Management Agencies (ATMA) Extension system of State agricultural departments is the weakest link in the chain between research and the farmer. Large number of vacancies of extension workers in the State Agriculture Department ATMA is central Governments effort for State extension reforms.

National Dairy plan (Phase-1)

With assistance from World Bank Cabinet approved it in 2012. Produce 150 million tons of milk by 2016-17.

FOOD MANAGEMENT
The main objectives of food management are 1. Procure foodgrains from farmers at remunerative prices, 2. Distribute foodgrains to consumers at affordable prices (especially poors and vulnerable sections of society via Targetted public distribution system =TPDS) 3. Maintain food buffer stock for food security and price stability.

FCI

Food Corporation of India (FCI). It is the nodal agency to procure, store and distribute foodgrains. It procures foodgrains, mainly for the targeted public distribution system (TPDS) and other welfare schemes of the Government e.g. Antyodaya Anna Yojana (AAY), Mid-day meal, Integrated Child Development Service, Annapurna etc. Challenge: storage capacity = not good= wheat, rice gets rotten and becomes unfit for human consumption.

Decentralized Procurement Scheme

Introduced in 1997 Under this system, State governments themselves producre and distribute foodgrains (instead of via FCI).

Open Market Sale Scheme (Domestic)

FCI procures foodgrains mainly for distributing to poor via PDS shops.

However, FCI also sales wheat and rice in the open market from time to time to enhance market supply of foodgrains and to offload its surplus stocks.

Now lets look at some schemes (Government schemes= goldmine minefield for MCQs).

Mid-Day meal

Scheme is implemented By HRD ministry. But Department of food and civil supply (under Ministry of Consumer Affairs, Food and Public Distribution) provides the food grain requirement. Wheat based nutrient program Under Integrated child Development scheme Scheme implemented by Ministry of Women and Child Development. Emergency Feeding program To provide food to old, infirm, destitute BPL under distress condition. Launched in mid 90s, for some districts in Odisha (KBK region). National social assistance program In mid 90s. To fulfill article 41 under DPSP (right to work, education and public assistance in certain cases). It contains following components

WBNP

EFP

NSAP

1. Indira Gandhi National Old Age Pension Scheme (IGNOAPS), 2. Indira Gandhi National Widow Pension Scheme (IGNWPS), 3. Indira Gandhi National Disability Pension Scheme (IGNDPS), 4. National Family Benefit Scheme (NFBS): to BPL family, for death of primary breadwinner.

5. Annapurna (food).

TDPS

Targeted Public distribution system. Started in late 90s Initially, to provide 10 kg food grain / per family / month Now amount increased to 35 kg per BPL and AAY family per month. Antyodaya Anna Yojana Started in 2000 Find poorest of poor families in BPL (covered under TPDS) And give them wheat @Rs.2/kg and Rice @Rs.3/kg Started in 2000 By rural Development ministry. For senior citizen who are not getting pension under NOAPS (National old age pension scheme). Annapurna gives them 10kg food grain per person per month. Later it was merged in the National Social Assistance Programme (NSAP). Initially By Tribal affairs ministry (now transferred to Dept of Food and Public distribution) During natural disaster or lean season, the marginalized households dont have money to buy ration. They can borrow food grains from the village grain bank. Village grain banks are setup in food scare areas like drought prone, hot/cold desert, tribal and hill areas. Not again, man this is becoming so damn clichd. Rajiv Gandhi Scheme for empowerment of

AAY

Annapurna

Village grain bank

SABLA

Adolescent girls. SABLA implemented by Ministry of Women and Child Development. (not by HRD ministry or social welfare ministry) SABLA is created by merging earlier two schemes : Nutrition program for adolescent girls + Kishori Shkati Yojana. Target: girls aged 11-18 100 gms of foodgrain per day per girl for 300 days in a year.

National Food Security Bill

Dec 2011

Introduced in Lok Sabha. It aims to covere of 75% of the rural and 50% of the urban population for subsidized foodgrains under the Targeted Public Distribution System, +additional support to women, children, pregnant and lactating mothers, homeless, those affected by disaster etc. Bill was referred to the Parliamentary Standing Committee on Food, Consumer Affairs and Public Distribution for examination.

Jan 2013

Parliamentary Standing Committee on Food, Consumer Affairs and Public Distribution submitted its report to the Speaker Mira Kumar (kripya beth jayiyeTM) Issue: We need not just food security but also nutritional security. Therefore, Government needs to increase both per capita availability of foodgrains + right amounts of horticulture and protein rich items in the food basket of the common man

International Co-op
45 FAO

Food and Agriculture Organization specialized agency of the United Nations

good nutrition and food security for all. HQ: Rome, Italy World Food Programme (WFP) food assistance branch of the United Nations, headquarters in Rome, Italy provide food to victims during war, civil conflict and natural disasters and afterwards. Millennium Development goals. Total 8 goal and first is: removing poverty and hunger. provide food security to the people of SAARC region. Member states maintain reserve of either wheat or rice or combo of both.

60s

WFP

200015

MDG

2007

SAARC Food bank

Conclusion

In the green revolution belt (Punjab-Haryana) there is overexploitation of water resources, overuse of fertilizer. This has led to soil erosion, soil salinity, water logging. Pace of agricultural growth in the eastern and north-eastern regions has been slower than in the rest of the country. India has failed to meet its 4% agro growth target under 11th FYP. India faces stiff challenge of feeding its growing population. India will have to invest heavily in farm research, rural infrastructure, agro credit, irrigation, seeds-fertilizer, farm mechanization etc. to achieve that 4% target.

Timeline
198 5 Mid-day meal (as per India 2013 (yearbook) chapter on food and civil supplies.

198 6 199 0 199 5 199 5 199 7 199 8 200 0 200 0 200 0 200 5 200 6 200 7 201 0 201 2

WHEAT BASED SUPPLEMENTARY NUTRITION Program under ICDS Watershed Development for rainfed areas

Emergency feeding program National social assistance program

Mid-day meal (as per India 2013 (yearbook) chapter on education. Targeted PDS Kisan Credit Card Cattle and buffalo breeding project Antyodaya Anna Yojana Annapurna National Horticulture mission National bamboo mission

National food security mission Rashtriya Krishi Vikas Yojana.

SABLA National Dairy plan phase 1 (NPD-1)

Mock Questions
1. India doesnt rank first in the production of a. Pulses b. Tractors c. jute d. Cotton 2. India ranks second in production of a. Rice b. Wheat c. Fruits d. All of above 3. for ___ th Five year plan, the target for average annual growth in GDP from agriculture and allied sector is ___ % a. 11, 3.6% b. 12, 4% c. 12, 3.6% d. 11, 4.5% 4. What is the approximate share of Agriculture and allied activities in the GDP of India? a. 14 b. 58 c. 4 d. 3.6 5. From this April to next april, what is the correct order of crop seasons? a. Kharif, Rabi, Zaid b. Rabi, Kharif, Zaid c. Zaid, Kharif, Rabi d. None of above 6. National monsoon mission is launched by a. Earth System Science Organization b. CSIR c. ICAR d. Meteorological Department 7. Which of the following is covered under Nutriend Based subsidy a. Phosphatic fertilizers b. Potassic fertilizers

c. Both d. None 8. Which of the following program is not directly associated with ICAR? a. Farmer first b. Student Ready c. NICRA d. Indian Monsoon Mission 9. Weather cock is a ____ designed by ____. a. Mechnical instrument, CSIR b. Mechnical instrument, Meterological Department. c. Software package, ICAR d. Software package, CSIR 10. Banni and Chilika are breeds of a. pigs b. buffalo c. sheep d. cow 11. Incorrect Match a. Jakharana: goats b. Ghungroo: pigs c. Muzaffarnagari: sheep d. Motu: Buffalo 12. ICAR found herbs like Kali sarson and Lemon grass beneficial for certain cold water fishes. Because a. they provide nutrition to the fishes b. they inhibt the growth of pathological fungi that infects those fishes c. they improve the reproduction rate those fishes d. None of above. 13. Which of the following doesnt fall under State list a. Agriculture b. Agricultural research c. irrigation and canals d. Adulteration of foodstuff 14. National food security mission has three major components viz a. Rice, Maize, Pulses

Wheat, Rice, Maize Rice, Wheat, Pulses Wheat, Rice, Coarse Grains None of above 15. Which of the following state is not covered under Bringing Green Revolution to Eastern India a. Bihar b. Chattisgarh c. Jharkhand d. Odisha 16. Wheat based nutrient program is a part of a. Mid day meal b. ICDS c. SABLA d. AAY 17. AAY is meant for a. Poorest of Poor b. APL c. BPL and BPL d. Widows and destitute 18. Target beneficiary of Annapurna a. senior citizen b. children c. adolescent girls d. pregnant and lactating mothers 19. Village grain banks are setup in the areas having a. food scarcity b. surplus food grain production c. genetic diversity in agricultural crops d. none of above 20. Who implements SABLA? a. Women and Child Development ministry b. HRD Ministry c. Social welfare Ministry d. Rural Development Ministry 21. Who implements Annapurna? a. Women and Child Development ministry b. HRD Ministry

b. c. d. e.

c. Social welfare Ministry d. Rural Development Ministry 22. Who implements Mid-day meal? a. Women and Child Development ministry b. HRD Ministry c. Social welfare Ministry d. Rural Development Ministry 23. Among the following schemes, which one is oldest? a. Mid day meal b. TDPS c. AAY d. Annapurna 24. National food security bill was examined by Parliamentary standing Committee on _____. a. Agriculture and allied activities b. Finance c. Social welfare and social justice d. Food, Consumer Affairs and Public Distribution 25. National Social assistance program contains schemes that provide for a. pension to certain category of people b. money on the death of primary breadwinner in BPL family c. food to certain category of people
2.d 3.b 4.a 5.c 6.a 7.c 8.d 9.c 10.b 11.d 12.b 13.b 14.c 15.all are correct 16.b

17.a 18.a 19.b 20.b 21.d 22.b 23.a 24.d 25.d 2.d 3.b 4.a 5.c 6.a 7.c 8.d 9.c 10.b 11.d 12.b 13.d 14.c 15.None(All are included) 16.b 17.a 18.a 19.a 20.a 21.d 22.b 23.a 24.d 25.d

Question . Ive come across these terms numerous times, but couldnt make anything out. Whats all these about Base year prices and Current year prices while calculating economical statistics?

Tell me what is inflation? Its the increase in the price of a product. How can you say there is inflation? Because, earlier in the year 2001, we could buy a litre of petrol for Rs.50, but now its Rs.70/- per litre. So there is price-rise and hence there is inflation. Means you need to compare the current price, with some old price to say that the price has increased (or decreased), right ? Hence, to calculate the inflation (CPI,WPI) well need to compare the price of some item for two different years. Suppose Price of a lifebouy soap was Rs.10 in 2001. And now it has increased to Rs.12 per bar. So what is the % increase? [(12-10)/10]*100=20% incrase in the price of a soap.

What did we do, in above formula?

We took 2001 is the base year and 2011 is the current year. Then we divided the change in price, with the price of base year and multiplied it with 100 to get the percentage. If price of a soap was Rs.1 in 1950s (dont get excited because in those days, monthly income of most middle-class people was around 100-300 Rs, so one rupee was a big amount.) So with 1950 as base year, whatll be the % price increase? [(12-1)/1]*100=1100% increase in the price of a soap! But does it make any sense to calculate inflation with such an old base year? Ofcourse not, because lot things have changed after 1950, including the salaries of the middle class people. So you wont get the real picture. Inflation is a hurt-meter. You cannot fathom how much it hurts now, if you didnot feel less pain earlier. Those who lived in 1950s are all either dead or retired. And the current-working population never actually bought a soap for 1 rupee. So how much is the soap price hurting the

current-population, to know that answer, you need to set the hurt-meter to compare the prices of recent memory: oh yeah back in 2004 it was only 10 rupees and now its 12 so yes I can feel it hurting me. Morale of the story: We need to have the base-year at some near-past level like 2004-05 to get the real picture of inflation. (Earlier this base year was about 1993-94) Now lets get a lil technically correct, above post was written to clear the basic concept of base year and current year only, the CPI and WPI are not calculated so straight-forward.

How to calculate the WPI or CPI?

Price of a bike was 30,000 in 2004 and now its close to 55,000/-. Price of one litre milk was 25 Rs. in 2004 and now it is almost 60/- (After Sharad Pawar advised all the dairies to buy an alarm, which rings at paheli taarikh every month to remind them to increase the price without fail) So, What hurts to you more, or what hurts the people at large: bike price or milk price? ofcourse the milk price inflation because you need to buy it every day. So when calculating the inflation, you need to weight the products according to their usage.

The weightage given in WPI

It is something like this 1. Primary Articles (food,fruits etc):22% 2. Fuel, Power, Light & Lubricants :14% 3. Manufactured Products (biscuit,toothpaste):63% Now survey the prices of all items in the base year and in the current year. Then you plug them in the Lesperes Formula for weighted arithmetic mean. (Formula is not important, but what is important for you to know is, that it is not a simple average but a weighted average) And you get a number, we call it the WPI index number for the given year or given week or given month. Suppose after calculation you get a number 110 on 1st August 2011.

For base year we assume that WPI is 100. So there is 10% inflation. i.e. [110-100/100]*100 Now on 1st September 2011, you calculate again with new price data and the number is 112. What does that mean? The inflation has increased by 12% compared to compared to base year AND inflation has increased by 1.8% compared to last month. i.e. (112-110)/110*100