ADB economists are practically saying that the RBI and the Indian government are the main characters in the Bollywood remake of the movie Dumb and Dumber. Who cares about wholesale inflation when citizens have to face consumer price index inflation every time they visit the store. The CPI numbers are staggering and the government is doing its best to hold interest rates low, to allow for big projects to take off at subsidized loans. They are afraid to upset the apple cart, lest they be seen as the reason for the collapse of the Indian stock market. With huge vested interests in real estate all over the country, Indian politicians are responsible for the mayhem caused to the common man whether it is to run his household or to buy his long cherished dwelling.
Business Standard reports
India's inflation indicator confusing, inconsistent: ADB
Press Trust of India / New Delhi January 15, 2010, 22:05 IST
The Asian Development Bank (ADB) today suggested that policy makers in India 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.
Sugar prices rose 53.98 per cent in December. Sugar in the retail market is selling at nearly Rs 50 a kg.
However, consumer price inflation for agriculture labour and rural labour stood at 15.65 per cent each in November, while retail inflation for industrial workers was 13.5 per cent.
Rising food inflation-- close to 20 per cent -- has been a cause of concern for the government.
Finance Minister Pranab Mukherjee too had voiced concern at a recent pre-budget meeting with the states Finance Ministers here.
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