Inflation, National Income and Public Finance

Inflation is a sustained increase in the general price level of goods and services over time.

Deflation is a sustained decline in the general price level.

Disinflation occurs when the rate of inflation declines, even though the overall price level may still be rising.

The Consumer Price Index (CPI) is used to measure retail price changes for a representative basket.

WPI tracks changes in prices of a basket of goods at the wholesale level; it does not cover services in the same way as CPI.

Demand-pull inflation occurs when aggregate demand rises faster than the economy‘s capacity to supply goods and services.

Cost-push inflation occurs when increases in production costs, such as energy or input prices, push prices upward.

Fiscal deficit is broadly the excess of total government expenditure over total receipts excluding borrowings.

Revenue deficit occurs when revenue expenditure exceeds revenue receipts.

Income tax is a direct tax because the tax liability is imposed directly on the taxpayer‘s income.

GST is an indirect tax levied on the supply of goods and services under the GST framework.

A progressive tax takes a larger proportion of income as income rises, under the relevant tax schedule.

Public debt is the outstanding borrowing of the government or public authorities as defined by the measure used.

Disinvestment refers to the government selling part or all of its equity stake in a public-sector enterprise.

Revenue expenditure generally meets ongoing expenses, while capital expenditure creates assets or reduces liabilities under budget classification.

Nominal GDP values current-period output at current prices.

The GDP deflator is a price index comparing nominal GDP with real GDP.

GVA measures the value of output less intermediate consumption for a producer, industry or sector.

Primary deficit is fiscal deficit minus interest payments.

Countercyclical fiscal policy seeks to moderate economic fluctuations, for example by supporting demand in a downturn and restraining it when the economy overheats.