Business Today

How the world measures inflation

India is the only major country in the world that measures its inflation rate according to the Wholesale Price Index; most others do it on the basis of the Consumer Price Index. Here we take a look at how this important statistics is calculated worldwide.

twitter-logoManu Kaushik | Print Edition: May 4, 2008

US: Housing (42.1 per cent) has the highest weightage in the US CPI, followed by transportation (16.9 per cent), food & beverages (15.4 per cent), and medical care(6.1 per cent). The US CPI does not not include food and energy.

Brazil: Every month, 500,000 quotes are taken for 512 goods and services from 27,500 establishments for the purpose of calculating the CPI. The weightages are not available

UK: Strangely, recreation(15.3 per cent) is given the highest weightage, followed by transport (15.2 per cent), restaurants and hotels (13.8 per cent), and housing and household services (11.5 per cent) in the UK's consumer price index.

Russia: Food (54 per cent) gets the maximum weightage on the CPI, followed by manufactured goods (31 per cent) and services (15 per cent).

China: In China, food gets a weightage of 34 per cent, followed by entertainment, education and stationery (14 per cent), housing (13 per cent), transportation and communications (10 per cent) and healthcare (10 per cent).

India: WPI is the index that is used to measure the chnage in the average price level of goods traded in wholesale market. The index comprses 435 items divided into three broad categories: Primary articles (food, minerals) that have a weight of 22.02 per cent; Fuel, Power, Light and Lubricants (14.23 per cent); and Manufactured Products (63.75 per cent).

Why isn't CPI used in India?
It won't be easy to shift from the WPI model to a CPI model. There are four different types of CPI indices—for industrial  workers, for Agricultural Labourers and for Urban Non-manual Employees—which makes a switchover difficult and unwidely.

World growth slows as advanced economies stumble

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World growth is expected to improve only in 2009, but there is a 25 per cent chance that global economy will record 3 per cent or lower growth in 2008, equivalent to global recession, says an IMF report.

Continuing inflation worries, particularly in the wake of increasing commodity prices, large current account surpluses, and the uneven pattern of exchange rate movement around the world are the other downside risks.

The rapidly globalising emerging economies have so far been less affected by financial market turbulence and have continued to grow at a rapid pace. This group is led by India and China. Growth across all emerging and developing regions will remain above trend.

China and India, which grew at 11.4 per cent and 9.2 per cent, respectively, in 2007, are projected to grow at 9.3 per cent and 7.9 per cent, respectively, in 2008.

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