Introduction

When a teacher says your test scores improved by 25%, or the news reports that the cost of everyday goods rose 30% over a decade, both are talking about the same underlying idea — an index number. Index numbers are a widely used statistical tool for describing how something has changed between two situations, most often across time but sometimes across location or other characteristics too. They show up constantly in economic reporting: the Consumer Price Index (CPI), Gross Domestic Product (GDP), and Retail Sales Index (RSI) are all built as index numbers, and stock exchanges track market performance through indexes such as Nifty (NSE) and Sensex (BSE). Beyond economics, index numbers are increasingly used to summarise complex social ideas — such as poverty or prosperity — into a single comparable figure. This chapter builds up the idea of an index number from first principles: what it me …