 Pranob Sen |
Where is inflation hurting most?
At first, the inflation was the highest for minerals and metals, agricultural products, primary articles and, of course, oil. That happened in January. It has now trickled down to include manufactured goods as well.
Which is more important, the WPI or the CPI?
Both are equally important. The purpose of the WPI is to capture the price change in goods from the production side. Coupled with the CPI, it gives a complete picture of the inflationary state of the economy. Any price increase is first picked up by the WPI.
Using the WPI figures to measure the impact of inflation on consumers is wrong. Unfortunately, the media latches on to these numbers because they are released every week. The consumer-oriented analysis of the WPI data is completely useless. And by the time the CPI for a particular month is out, it is history. No one revises their arguments based on these figures.
...and not always accurate
We compile the WPI data by collecting it ourselves and having it reported to us through external sources. Because of the latter, we cannot ensure that all updated prices reach us every week. So the prices of items that are not reported are assumed to be the same. However, in case of the CPI, the entire data is collected. So in terms of accuracy, it is far superior to the WPI.
Is the solution for consumers’ confusion a single index?
There are two reasons why we can’t have one index as in the developed countries. First, the Indian markets are not as well integrated. To grasp inflation, we need to track price changes along the entire value chain, that is, till the products reach consumers. For this, we cannot rely on the CPI alone. Moreover, the CPI is released on a monthly basis and this frequency is not adequate.
A new index for urban Indians
The CPI figures are being consolidated under a new index—CPIUrban. We will start releasing the figures for CPI-U from next year. CPI-UNME will be discontinued. The list of items and their weightages in the new index have been finalised.
Why CPI-U will be more relevant
As the index has a broader consumption basket, more product classes have been added. Also, within a product class, other units have been considered. For instance, for education, we only considered inflation in government schools. Now, data from some private schools will also be included. The number of services included in the new index are more or less similar to CPI-UNME.
But you will have to compute inflation for your branded shirt
Even a Colgate toothpaste is a branded good. And it is probably considered while computing inflation in that product category. But inflation in elitist goods like branded clothes will almost never show up in any index because their consumption is very limited.
Not predicting the unpredictable
As head of a statistical organisation, I don’t want to speculate on the inflation rate six months from now. Then I might be expected to ensure that inflation rates actually reach the levels I predict! But the prices of primary goods should stabilise. For the rest, wait and watch how the price of crude oil moves.
