Sunday, December 9, 2012

Political opportunism over economic sense

That’s what the UPA did with the inflation figure, and thus favoured political opportunism over economic sense, says GYANENDRA KASHYAP

The high base effect also has a role to play in this case as inflation stood at 7.78% during the corresponding week of the previous year.” A quick reality check reveals that the consumer basket is consistently moving northwards while the headline inflation moves southwards. Picture this - inflation rate (as on March 7, 2009) for sugar, salt, pulses, cereals, milk and spices was respectively pegged at 22.37%, 11.07%, 10.97%, 10.16%, 7.1% and 6.23% – now that’s the bitter reality.

The miniscule weightage attached to this category and the high price that these command is subtly dwarfed by the inclusion of numerous other commodities, which strictly speaking do not qualify to fall within the ambit of essential goods. The current basket of WPI does not include power bills, medicines, education and transport, et al (which, in real sense, involve a heavy outgo); but is tilted more towards manufacturers so that the behaviour of the index for this group largely determines the movement of the overall index. Now that’s the manipulation government has been resorting to; had it not been so, the headline inflationary picture could well have been altogether different. The government plays with WPI while what matters to the ‘aam aadmi’ is CPI. Consider this; food prices have about 60% weightage in CPI (AL and RL) while its weightage in WPI is around 15%. Quite a sham, unless the government expected consumers to drastically alter their spending patterns!


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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