No, you didn't get my point, Price index is never same as inflation. what I mean is, inflation will be measured based on % change of Price Index. Whatever you said is correct, Change in price index is never a root cause/cause of inflation. Anyway Mohandas see the below:
In Simple Terms:
What is Inflation: In a simeple term, inflation is nothing but increase in the price of goods and services over a period of time.
How to Measure: To measure how much % of price changed for a particular Good/Service for a particular period of time (lets say 2006-2007), will be known when we consider Price Index of that particualar Good / Service for that particula period of time (2006-2007).
Good or Bad: a small amount of infaltion must be there in any economy to progress. Otherwise, there is a chance of Deflation (which is opposite to inflation, ie decrease in the prices) If we consider one problem with deflation, then you will understand why inflation is required for aconomy, For instance, XYZ co., is manufacturing fans for 100Rs. each and selling it for 105Rs. In deflation, as said, the price is decreased, if the fan price falls by 6Rs. XYZ company has to sell it for 99Rs. ie with loss of Rs.1. So, in a overall effect XYZ company will make losses and will hesitate to continue his business as deflation is there, which is not good for economy. So a small amount of inflation shuold be there. But high inflation is also too dangerous, as you may be experiencing the Fuel/ Food price in indi
