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160 Economic Survey 2021-22

CPI-C and WPI inflation during the year remained a subject of debate. This divergence
can be explained by factors such as variations due to base effect, difference in scope
and coverage of the two indices, their price collections, items covered and difference in
commodity weights. Further, WPI is more sensitive to cost-push inflation led by imported
inputs. With the gradual waning of base effect in WPI, the divergence in CPI-C inflation
and WPI inflation is also expected to narrow down.

GLOBAL INFLATION

5.1 In 2021, inflation picked up globally as economic activity revived with opening-up of
economies. COVID-19 related stimulus spending, mainly in the form of discretionary handouts
to households in major economies, along with pent up demand fueling consumer spending,
pushed inflation up in both advanced and emerging economies. In the advanced economies,
inflation has increased from 0.7 per cent in 2020 to around 3.1 per cent in 2021 (Figure 1) (IMF,
2022). The surge in energy, food, non-food commodities, and input prices, supply constraints,
disruption of global supply chains, and rising freight costs across the globe stoked global
inflation during the year. Crude oil prices also witnessed an upswing during the year on the back
of increased demand from recovering economies and supply cuts by the Organization of the
Petroleum Exporting Countries and its allies (OPEC+).
Figure 1: Consumer Price Inflation Rates

8.0
Advanced economies EMDEs
7.0 5.7

6.0
Inflation rate (per cent) 5.0 3.1

4.0

3.0
2.0

1.0
0.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Source: World Economic Outlook, January 2022 Update, IMF
Note: The figure are annual averages.
Advanced Economies include 40 economies and Emerging Markets and Developing Economies (EMDEs)
include 156 economies as per IMF classification