Monday, June 02, 2008

Inflation ?

There is no time to stand and stare. Last week was one of the rare occasions when the social 'server' in me woke up. I was out buying our meagre weekly stock of vegetables, wondering at the rising prices of common commodities. It hit me when I realized that 'rising' had long ceased and it was now rocketing ! Believe it or not, a Kg of Carrot that used to cost me 22 bucks not long ago now costed me 64 bucks! That was the inspiration for me to come up with this blog. No mincing of words people, I WANT this to be an eye-opener to anyone who's not been aware of this mercurial rise in prices.

For those of you who have been following newspapers - you might have come across the Govt. officials quoting a 8.1% increase in inflation. Doesn't that strike a chord in you ? Didn't a mere 8% rise seem too ridiculous to believe ? You can see for real that the prices of carrots have gone up by almost 300% and still the official rate indicates 8%... If you now think that the figure 8.1% is absurd, THEN, you really are is INDEED absurd !. Okay, that said, what does this 8.1% indicate ? what is the trick employed here by our financial magnets ?

Bingo ! India uses the Wholesale Price Index (WPI) to calculate and then decide the inflation rate in the economy. WPI is the index that is used to measure the change in the average price level of goods traded in wholesale market. Now you can sit and wonder which one of us would buy anything on a wholesale price. Perhaps the barely surviving middle-class are the ones who buy wholesale commodities!! Now you know how inflation rate in India has been projected.

If you think that's the limit, there's more in store for you. This WPI is not calculated for all commodities, but only for a chosen few commodities. Some of the commodities that I found in this wonderful list was coir-fibre, raw-silk, Fodder, Papaya, Guava, Hessian-cloth, tyres, Medical X-ray films, Excavators, Cranes, Jeeps, Truck chassis. Getting a feel of what is happening around here? The proportion of commodities that are used by the common man are less compared to the commodities that go for bulk consumption. It struck me to see that none of the commodities in the housing, entertainment and the education sectors comes into picture here. Given that India is definitely a service economy, where did all these entities disappear? I would want each of you to be aware that the 8.1% that is projected in the official figures can be subjected to severe manipulation. Please go through the list available to see the entire list. ( Ask for proofs and I'll point you to your very own expenses ledger of the yester years and you'll clearly see that the expenses indicate the rise to be a greater than 8% atleast by a few orders.

A few of you might argue that CPI would provide more reasonable statistics and I would completely agree with you. But please remember that the basket of commodities still remain the same. India is the only major country that uses a wholesale index to measure inflation. Most countries use the CPI as a measure of inflation, as this actually measures the increase in price that a consumer will ultimately have to pay for. On the top this, the recent food crisis has led to further increase in the price of all basic commodities.

Result - the lower income group find themselves not able to afford carrots. Even trivial entities like chillies have registered an dramatic increase of 400% (50 gms of chillies now costs 4 rupees). People like me, who typically "buy" food would seldom realize the gravity of the situation. With such a drastic shot of price rise people are going hungry by the thousands with each passing day. A family with a monthly income of Rs.2000 would find themselves on half-empty stomachs for most part of the month. I hate to end this post on such a grotesque and sordid note, but I couldn't help saying this.. Govt officials expect the "WPI" to reach the 10.1 mark very soon.


Anonymous said...

It is not just the people , even the "machinery " voted for by us, is a sort of Giant shock absorber! We are capable of absorbing anything.
This link is ample proof , that inflation is not that bad, but good enough to just give "food" for our thoughts, (as usual, ha ha ha)
the link:

ViNayagar said...

Well said dude.. The strange thing is as somebody said some time ago, we the professional people are being taught how to increase the demand. Acceptably its time for us to learn how to increase the supply as well. After all, inflation is just a factor of demand & supply.

Mighty Titan said...


Absolutely. In fact, the best solution to fight inflation is to increase productivity rather than taking temporary solutions like playing around with the interest rates.