BharatNotes Deflator
nounUsage in a UPSC answer
In assessing whether the headline growth figures reflect genuine expansion or merely rising prices, the Economic Survey rightly emphasises the GDP deflator, since a nominal surge that survives deflation into real terms is the only credible signal of improving welfare.
Synonyms
Antonyms
Word Family
deflate (v), deflation (n), deflationary (adj), deflated (adj), deflationist (n)
Root
Latin dē- = away, down + flāre = to blow; English deflate + -or = agent suffix
Etymology
From English deflate (from Latin dē- "from, away" + flāre "to blow") + -or (agent suffix) — one that deflates or removes the inflation component.
Memory Hook
A deflator "lets the air out" of inflated numbers — like deflating a balloon, it strips the puffed-up price effect to leave the real, true-size figure.
How This Word Works in UPSC Writing
The GDP deflator, calculated as nominal GDP divided by real GDP times 100, is the broadest available measure of price change because it covers every good and service counted in domestic output, including those never bought by households. Two properties distinguish it. Its basket is implicit and changes each year with the composition of output, unlike the fixed basket of the CPI, so it captures substitution automatically. And because imports are excluded from GDP by construction, the deflator excludes imported price pressure that the CPI does include. This is why headline inflation and the deflator can move apart, and why the deflator is used to convert nominal growth into real growth rather than to set monetary policy.
Don’t Confuse It With
The GDP deflator is implicit, economy-wide, has a changing basket and excludes imports. The CPI uses a fixed consumption basket, includes imported consumer goods and is the index the monetary policy framework targets. The WPI tracks wholesale transactions and covers no services at all. Core inflation is headline inflation stripped of food and fuel. Note that the base year of the national accounts series is revised periodically, so real-terms comparisons that straddle a revision are not like for like.
Hindi Meaning
अपस्फीतिकारक (apasphītikārak); सकल घरेलू उत्पाद अपस्फीतिकारक for the GDP deflator.
Common Questions
- What is the GDP deflator?
- Nominal GDP divided by real GDP, multiplied by 100. It converts current-price values into constant-price values by removing the effect of price change.
- How does the GDP deflator differ from the CPI?
- The deflator covers all domestically produced goods and services with a basket that changes annually and excludes imports, while the CPI tracks a fixed consumption basket that includes imported consumer goods.
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