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On
June 19, 2009 the WPI (wholesale price index) inflation have turned negative, but
the consumers inflation rate is rising. Prices of most essential food items are still showing double digit
increase in prices, with no let-up in the prices that people pay. This deflation figure is based on an index drawn up on the basis of wholesale prices which doesn’t take into account all the items of
daily consumption.
The wholesale price index is the price of a representative basket of wholesale goods and changes in the index are used to measure inflation in the economy. The WPI focuses on the price of goods traded between corporations rather than goods bought by consumers.
The consumer price index (CPI), which is a measure of the average price of consumer goods and services purchased by households.
India is perhaps the only major economy in the world which still uses the WPI to measure
inflation. |
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Prices of most essential food items are still showing double digit increase in prices, with no let-up in the prices that people pay. A look at latest data collected by the Price Monitoring Cell of the Department of Consumer Affairs shows that prices of daily use items such as rice, potatoes, onions, sugar, salt and tea have registered a substantial surge on a year-on-year basis.
Retail prices of sensitive items including onions, potatoes and sugar continue to show substantial increase over last year’s levels
in India. Rice and tur (pigeon pea) prices have also shot up substantially across nearly all
cities. Price rise in items such as tea has seen a spurt across the northern and southern
cities, while salt prices have also shot up around the country. Edible oils including groundnut oil, mustard oil and vanaspati have been exceptions, showing either a dip in prices or only a marginally increase in retail prices
The lower production of sugar has primarily led to higher prices, prices of pulses have continued to remain high as the cost of imports has gone up due to a weakening rupee. Onion prices continue to stay high despite an expanded acreage under the winter crop. |
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An increase in minimum support prices of wheat and paddy has ensured prices of these products remain high despite more-than-adequate production in the current season. For instance, for 2008-09, the government has raised the minimum support price
(MSP) of wheat by 8% to Rs 1,080 a quintal (100 kg) and of common grade paddy by 31.8% to Rs 850.
The impact of a rise in these commodities is felt more acutely at the retail, or consumer price index, level where the food group
constitutes 46% weightage. Latest data up to April ‘09 show that consumer price inflation for industrial workers stood at 8.7%, up
from 7.8% in the corresponding period of the previous year.
“The foodgrains situation is a cause of concern. Total grains output in 2008-09 was lower than that in the previous year,” said Siddartha Roy, economic adviser to the Tata group. “Besides, the
monsoons have still not arrived.
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