What is Deflating?How it is helpful to calculate the anuual income and compare for two periods?

Deflating: Deflating means correcting or adjusting a value which has inflated. When prices rise, the purchasing power of money declines. If the money incomes of a people remain constant between two periods and prices of commodities are doubled the purchasing power of money is reduced to half.
Ex: If there is an increase in the price of rice from Rs10/kg in the year 1980 to Rs 20/kg in the year 1982, then a person can buy only half kilo of rice with Rs 10. So the purchasing power of rupee is only 50 paise in 1982 as compared to 1980.
Purchasing power of money is inversely proportional to price index.
Purchasing power of money = 1/price index
In times of rising prices the money wages should be deflated by price index to get the figure of real wages. The real wages alone tells whether a wage earner is in better position or in worst position.

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