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Uses of Index Number, Index numbers are used to record changes in output, income, employment, productivity, business activities etc., Index numbers are used in different ways like:, i., , , Help in Policy formation:, These are indispensable tools for management of any government or non-government, organisation., , They are used in planning and formulating various government and business policies by studying, the various trends like prices, industrial production etc., ii., Act as Economic barometer, , Index numbers measure the pulse of an economy and act as a barometer to indicate fluctuations, in general economic conditions of a country., iii., Help in studying trends, , They help to find out the trend of exports, imports, industrial production, prices and a variety of, other phenomenon which further help in forecasting future trends., , To measure and compare changes, Index number helps in comparative changes in two variables:, , It is not possible to measure a change in absolute terms. But, index numbers provide a relative, measure to changes in the magnitude of a group of variables., , The changes over time and geographic location can be easily compared., iv., It help to measure purchasing power, , Index numbers are helpful in finding out the intrinsic worth of money as contrasted with its, nominal worth. This helps in formulating the wage policy of the country., v., Help in deflating various values, The price index number helps to adjust monetary figures of various periods for changes in prices., , Inflation and index number, , , , , , , , Inflation is described as a situation characterized by a sustained increase in the general price level., A small rise in prices or an irregular price cannot be called inflation. Persistent and appreciable, rise in prices, which can be called inflation., The WPI is the most widely used price index as an indicator of rat of inflation in the economy., It is only the general index capturing price movements in a comprehensive way and indicates, movement in prices of commodities in all trade and transactions., WPI is available on a weekly basis with the shortest possible time lag of 2 weeks., Due to all these attributes , WPI is the most commonly accepted measure of inflation.