Evolution of Money · Money Supply · Currency Facts · Inflation Types · WPI/CPI — SSC / Railway / UPSC / BPSC
Money: Anything that serves as a medium of exchange or payment for all goods and services.
| Stage | Form |
|---|---|
| Barter System (before money) | Exchange of goods for goods |
| Commodity Money | Animals, Shells |
| Metallic Money | Coins of Gold, Silver, etc. |
| Paper Money | Bank Notes |
| Credit Money | Bank-created deposit money; cheques/cards/drafts are payment instruments, not money themselves |
| Plastic Money (informal term) | Debit/credit payment cards; instruments accessing deposits or credit |
| Crypto Currency | Bitcoin and Ether; private crypto-assets are not legal tender in India |
| Type | Description |
|---|---|
| Legal Tender | Money legally valid for discharging monetary obligations, subject to legal rules and limits |
| Token Money | Intrinsic value less than face value; current ₹1 coin |
| Hard Currency | Widely accepted internationally, relatively stable and readily convertible |
| Credit Money | Not compulsory to accept; promissory note, cheque, bill of exchange, bank drafts |
| Hot Money | Quickly moves in financial markets; e.g. foreign currency in stock market |
| Standard Money | Full-bodied metallic money: face value approximately equals metal-content value |
| Near Money | Liquid financial assets not normally used directly for payment: short-term time deposits, Treasury bills, certificates of deposit |
| Soft Currency | Limited international acceptability/convertibility and/or greater exchange-rate weakness or volatility |
Liquidity: Ability to convert assets into cash quickly without loss or delay.
Most liquid asset: Cash
| Measure | Definition | Type | Liquidity |
|---|---|---|---|
| M₀ | Currency in circulation + Bankers deposits with RBI + Other deposits with RBI | Reserve Money | — |
| M₁ | Currency with the public + demand deposits with the banking system + other deposits with RBI | Narrow Money | Highest |
| M₂ | M₁ + Savings deposits with Post-office | Narrow Money | Less than M₁ |
| M₃ | M₁ + time deposits with the banking system | Broad Money | Less than M₂ |
| M₄ | M₃ + Total post office deposits (excluding National Savings Certificates) | Broad Money | Lowest |
Un-declared income / Black Money is part of the parallel economy.
M = Money Supply, V = Velocity of Circulation, P = Price Level, T = Transactions
Other major currency symbols cited at adoption: US dollar $, Japanese yen ¥, euro € and pound sterling £; the euro is a currency of multiple countries
According to Keynes, actual inflation begins after the full employment point.
| Type | Description |
|---|---|
| Creeping Inflation | Very low, gradual inflation; no universal official cutoff |
| Walking Inflation | Moderate inflation above creeping; numerical bands vary by textbook |
| Running Inflation | Rapid inflation; no single universally accepted official range |
| Galloping Inflation | Very high, accelerating inflation; often double/triple-digit annual rates, but thresholds vary |
| Hyper Inflation | Extremely rapid inflation; common academic benchmark: more than 50% per month |
| Open Inflation | Prices free to rise without government intervention |
| Imported Inflation | Due to rising prices of imported raw products (e.g., petroleum) |
| Group | Weight |
|---|---|
| Primary Articles | 22.75730% |
| Fuel and Power | 14.11433% |
| Manufactured Products | 63.12837% |
PPI measures producer-side price changes. India launched Output PPI, trial Input PPI and selected Service PPIs in 2026 alongside new WPI; WPI is planned to run in parallel during transition.
| Category | Full Form | Base Year | Compiled By | Key Use |
|---|---|---|---|---|
| CPI-IW | CPI – Industrial Workers | 2016 | Labour Bureau | Determining dearness allowance of employees |
| CPI-AL | CPI – Agricultural Labourers | 2019 (from June 2025) | Labour Bureau | — |
| CPI-RL | CPI – Rural Labourers | 2019 (from June 2025) | Labour Bureau | — |
| CPI-R | CPI – Rural | 2024 | NSO | — |
| CPI-U | CPI – Urban | 2024 | NSO | — |
| CPI-C | CPI – Combined (R + U) | 2024 | CSO (now NSO) | Used by RBI |
CPI-C is used by RBI, published by the Central Statistics Office (now National Statistical Office).
| Topic | Key Fact |
|---|---|
| Money Definition | Medium of exchange or payment for all goods and services |
| Most Liquid Asset | Cash |
| Legal Tender | Legally valid for monetary obligations, subject to applicable rules/limits |
| Token Money | Intrinsic value < Face value; Current ₹1 coin |
| Near Money | Liquid financial assets: short-term time deposits, Treasury bills, certificates of deposit |
| Fisher's Exchange Equation | MV = PT |
| M₁ | Narrow Money; Highest Liquidity |
| M₄ | Broad Money; Lowest Liquidity |
| M₀ | Reserve Money |
| ₹ Symbol Designed By | D. Udaya Kumar; Cabinet approved symbol on 15 July 2010 |
| India | Joined a select group of currencies with distinctive symbols; no robust universal country ordinal |
| Decimal Currency Adopted | 1957 |
| Devaluation in India | 1949, 1966, 1991 |
| Inflation | Continuous rise in general price level |
| Inflation Target (India) | 4%, tolerance band 2%–6% (April 2026–March 2031) |
| Demand Pull Inflation | Rise in demand |
| Cost Push Inflation | Rise in production cost |
| Keynes on Inflation | Actual inflation begins after full employment point |
| Stagflation | High inflation + High unemployment simultaneously |
| Deflation | Fall in general price level (negative inflation) |
| Reflation | Deliberately raising prices by increasing money and credit |
| Headline Inflation | Measured by CPI-C; includes food and energy |
| Core Inflation | Underlying inflation excluding food/fuel; not the statutory target measure |
| WPI First Published | Quick series: 10 January 1942; current base 2022–23 (effective June 2026) |
| WPI Compiled By | Office of Economic Advisor, Ministry of Commerce and Industry |
| PPI | Producer-side prices; Output PPI, trial Input PPI and selected Service PPIs launched in 2026 |
| CPI-IW Base Year | 2016; compiled by Labour Bureau |
| CPI-C Used By | RBI inflation target measure; base 2024; compiled by NSO |
| Phillips Curve | Possible short-run inverse relationship; not a stable long-run trade-off |