Email
Print
ShareIt is prompted, one fears, by the opposition of the Reserve Bank of India (the Union finance ministry also has reservations on this score) to change the status quo, namely the release of the inflation numbers weekly.
So, a compromise of sorts has been proposed, satisfying the need for a reliable index to monitor inflation which is possible if there is a switchover to a monthly index, while at the same time, assuaging the ruffled feelings of the central bank and a key ministry.
What is overlooked is that, any such index, based solely on primary articles and fuels, may be an imperfect gauge of the price trends.
This is because, in the group manufactures, there are several commodities used by the masses on a daily basis and whose prices tend to be volatile.
For example, under the subgroup, food products in the broader manufactures group, sugar and khandsari, edible oils, butter, milk powder and processed foods such as shrimp, prawn, meat and fish are included. Processed coffee and tea are popular among the middle class.
Such articles as papad, pickles, cashew also find a place in the shopping list.
Outside the food basket, manufactures boast of essentials like safety matches, tooth paste, toilet soaps and detergent cakes and powders, not to mention drugs & medicines, writing paper, exercise books, footwear, household utensils and plastic goods and batteries, prices of which may not be volatile but do changes at short intervals.
Common apparel items such as dhoti, saris and long cloth are rightly part of manufactures but in the new dispensation, outside the purview of weekly surveillance.
The question boils down to this: how a weekly index without key goods that are classified as manufactures, be a reliable indicator of prices.
Even if it is conceded that, for a large number of manufactured products, the frequency of price changes is far less than in primary articles and fuels, at least in respect of sugar and edible oils, the same stance is not valid.
As we know, in the Indian context, sugar is a very sensitive commodity and no government can be complacent when the price of this sweetener moves northward, although, masses are supplied this item at a levy price which is even below the cost of production and the open market prices are regulated by the leveraging the release mechanism.
Similarly, the government is exercised when edible oils exhibit a hardening tendency and imports are resorted to boost supplies.
How can any weekly index, without the inclusion of sugar and edible oils -- as indeed, a large number of items indicated above -- be a faithful barometer of price trends in the economy? One hopes better senses prevail and the government sticks to the proposal mooted by the Technical Report of the Working Group for the revision of the wholesale price index that the index be compiled monthly.
But the best course would be to construct a consumer price index number on the lines of the wholesale index to measure inflation, We will be in the distinguished company of 157 countries who use the consumer index for this purpose.
