Page 25 - Policy & Economic Report - June 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

• Act as economic barometer- Index numbers are very useful in knowing the level of economic and
business activities of a country. So, these are rightly known as economic barometers.

Problems involved in the construction of index number: -

• Selection of base period- Base period is the period against which the comparisons are
made. Selection of a suitable base period is a very crucial step. It should be of reasonable length
and normal one, i.e., it should not be affected by any abnormalities like, natural calamities, war,
extreme business cycle situations.

• Selection of sources of data- Depending upon the type of index numbers, the correct source
should be selected for data. For instance, to construct CPI, we need retail prices and to construct
the wholesale price index, we need wholesale prices.

Importance of Indexing: -

• It helps in guiding economic policy: - through Monetary and Fiscal Policy, wage adjustment, trade
policies etc.

• It helps in forecasting economic activity and predicting market behavior.
• It helps in assessing purchasing power & standard of living.
• It helps in assessing economic changes such as price fluctuations, production trends, cost of living

etc.

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