Sir,
It can happen only in India when wholesale prices shoot up and retail prices drop sharply. Or, when consumer prices flare up, wholesale prices are deeply depressed. Ordinarily, they may look somewhat absurd, but are often seen as true by the data provided under India’s government-run price indices such as the wholesale price index (WPI) and consumer price index (CPI). Take for instance, the data released by the government in March, 2022, showing that the wholesale inflation (WPI) in the country rose to 13.11 percent in February while the retail inflation (CPI) was down to as much as 6.07 percent that month.
Currently, retail prices are shooting up across the country although the price indices do not give such an impression. High retail prices are creating holes in the common man’s pockets. However, the government’s latest wholesale price index showed a negative price growth of 4.12 percent (provisional) in June against another negative growth of 3.48 percent in May. And, the CPI inflation rose to only 4.81 percent in June 2023, from 4.25 percent in May this year.
This raises the question of reliability of India’s price indices. The substitution bias, introduction of new goods, and unmeasured quality changes often fail to properly state the real cost of living. The matter is important as the government uses these indices to adjust for changes in the overall level of prices. In the past, top Indian bankers and economists had raised concerns about the reliability of the country’s inflation data. Inflation has repeatedly found mention in the RBI monetary policy committee’s reviews. RBI projects FY24 inflation at 5.2 percent, and is optimistic that CPI inflation will moderate this fiscal. However, rising retail price trends till now are yet to stand by such an optimism.
Nantoo Banerjee
on e-mail
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