Different Uses of Index Numbers

In the modern time, index numbers are extensively used for a large number of purposes in a variety of field’s viz. business, industry, economics and politics etc. However, its specific uses may be outlined as under:

• It is used to measure the changes in the wholesale price level of a country over a period of time.
• It is used to measure the changes in the cost of living of a certain section of the people living in a certain locality.
• It is very much used by the government agencies to formulate policies on different matters viz. fixation of dearness allowances of the employees, to do away with the unpleasant and unhealthy situations viz. strikes, lockouts etc.
• It is extensively used by the economists, sociologists, psychologists, physicians, and educationists as well, in the evaluation of various conditions of life.
• It is used in studying the general trend of a time series, and in forecasting the future events thereby.
• It is used in computing the real wages through the process of deflating and determining the purchasing power of money thereby.
• It is very often used in deflating the national income in an inflationary situation to arrive at the real national income.