vInidianz.com (16 Jan, 2010) — New Delhi: The Asian Development Bank (ADB) has suggested that Indian policy makers should consider making the Consumer Price Index the main barometer of inflation as the current system of measuring the rate of price rise on both retail and wholesale prices is creating confusion.
Inflation measured in terms of the Wholesale Price Index (WPI), experts say, is irrelevant at a time when the retail prices are very high. And there is at present a huge gap between retail and wholesale price inflation indices. The difference is due to the high weightage of food items in consumer price indices than wholesale price index.
“Policymakers should make the consumer price index the primary indicator of inflation instead of current two-tier measurement system which leads to inconsistencies and confusion,” the multilateral lending agency said in a study.
The Consumer Price Index (CPI) measures the retail prices, but in India there are many measures of this index.
Inflation measured by wholesale rates vaulted to more than a year’s high 7.31 per cent in December on higher food prices, mainly sugar, pulses and potato, adding to the government’s worries about price rise.
The headline inflation rate, as measured by the Wholesale Price Index (WPI), rose sharply to 7.31 per cent for the month of December primarily due to rising prices of primary articles, especially food items.
On Friday, the inflation rate shot past the Reserve Bank of India’s (RBI’s) forecast that inflation would reach 6.5 per cent only by the end of this financial year.
The inflation rate was 4.78 per cent for the month of November and 6.15 per cent during the corresponding month of the previous year. The rise in inflation in the current financial year so far is 8.02 per cent as against a build-up of 1.86 per cent in the corresponding period of the previous year.
Inflation rates for cereal and pulses, which constitute the essential consumption basket, posted double-digit growth rates of 13 per cent and 41.6 per cent, respectively, for December.
Further Reading- Stocks mixed after tepid inflation report – BusinessWeek
- Summary Box: Wholesale prices rise for 7th month – Washington Post
- Bank’s confidence on inflation questioned – Financial Times
- Food inflation eases to 18.65%; prices to cool down in New Year
- UK inflation rate rises to 4.4% in February – BBC News
- UK inflation rate rises to 4.4% in February – BBC News
- Canada January Consumer Price Index Report (Text) – Bloomberg
- Prices edge up, inflation still at bay – CNNMoney
- Inflation jumps to 4.78 per cent in November
- Why You Can’t Trust the Inflation Numbers – Wall Street Journal
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