Inflation at -1.61%. Should you be happy?

Eventhough the government has been harping that inflation has dipped into negative levels, does it mean that the prices of all essential goods have gone down?  Vegetables still cost high, fuel prices are still high, housing and rentals are still beyond the reach of the common man.  What is the data based on which the government claims that the inflation has been steadily decreasing ever since it reached double figures around 6 months ago?

This is because the Indian government is one of the very few governments in the world that calculates inflation based on Wholesale Price Index (WPI) and not Consumer Price Index (CPI) as the rest of the world does.

According to Wikipedia, Wholesale Price Index (WPI) is the price of a representative basket of wholesale goods. Some countries (like India and The Philippines) use WPI changes as a central measure of inflation.

Whereas, Consumer Price Index (CPI) is a measure of the average price of consumer goods and services purchased by households.

This is the reason why inspite of the govt’s claims that the inflation has entered negative territory, you dont see any decrease in the prices of goods when you go shopping. The figures that the govt trots out is wholesale prices.  The common finds no relief as the reduction in the wholesale prices take a long time to trickle down to his level.

According to the Reserve Bank of India website, CPI at the All-India level as on 11 June 2009 is 4.63%.  Anything else that the government tells you is simply hogwash.

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No comments

  • Quirky Indian

    It is complete hogwash…..the funny thing is, this scam has been known for years….but no one seems to want to change to the CPI. And neither has there been any recommendation or call/proposal to that effect. I can’t figure out what that is….

    Cheers,

    Quirky Indian

  • B K CHOWLA

    philp,this inflation rate funda is meant to confuse.I want to know about MEHANGAI.Inlfation is down,so why are the prices of COOKING OIL-WHEAT-BAJRA-SUGAR-VEGETABLES are still unaffodable?This is all crap and eye-wash and utter nonsense.Those who understand inflation,don’t care and those who are affected understand mehangai.We can never meet.
    Govt is only completing it’s weekly formality and giving some breaking news to the hungry TV channels.

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  • Liju Philip

    @QI, maybe its because the govt finds its easier to control the WPI than the CPI.

    @Chowla, exactly, the weekly declaration of inflation has become a fodder for breaking news for the news channels.

    @Amit 😀

    @Sara, thanks 😀