← GlossaryEconomy
Base Effect
A base effect occurs when a growth or inflation rate is distorted by an unusually high or low figure in the comparison period. If prices spiked last October, this October’s year-on-year inflation looks low even if prices are still high.
Why It Matters
Before reacting to a year-on-year number, check what happened a year earlier.
In India
In September 2026, onion prices were up 108% while tomatoes were cheaper than a year earlier, partly because tomato prices had spiked the previous year.
Related Terms