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…you must be joking! The decline in WPI-led index for inflation is not good news at all for the common consumers, as the numbers are manipulated, says Gyanendra Kumar Kashyap
Breaking News: Inflation is at a historic low! Head to the nearest vegetable vendor and you feel cheated by the news, and perhaps all the more by your very own interpretation of the statistic called inflation. True, the headline inflation numbers have come down ‘drastically’ but has it translated in some respite for the common consumers (aam aadmi – if you so please)? Do a reality check and you will get your answer – a big No! The inflation index – WPI (wholesale price index) – as displayed on your television screen is a flawed measure; it conceals more than what it reveals, like all good statistic. Whether in urban centres or in the rural heartland, at the retail level the current inflation is well over 10 per cent and not 0.44 per cent as the Breaking Newswallahs attempt to put it.
There are three kinds of falsehoods – lies, damn lies and statistics. Statistics on inflation are manufactured at the government factory (read Commerce Ministry), especially when the stakes are high. So, when the government pegs the current inflation as ‘a mere statistic’ at 0.44 per cent (statistically a historic low), one is left to wonder whether even today the Indian audiences are educated enough to see through this lie.
As the WPI touches that so called historic low, thanks to easing fuel prices, falling global commodity prices, policy measures such as a cut in duties and interest rates and most importantly, the high base effect, the disjunct between the two measures of inflation, viz. WPI and CPI (consumer price index) becomes all the more vivid. The low inflation rate, however, has not at all translated into low prices for items consumed by the common man. And here is the catch: declining headline inflation does not necessarily imply prices coming down. It only implies that the rate at which the prices of goods were rising has become slower. So when one hears that inflation is down to 0.44 per cent, what it really implies is that the prices today are higher by 0.44 per cent as compared to the prices on the same day a year ago. That’s a harsh reality many of us would not agree to accept. In fact, the prices will come down only when the inflation numbers turn negative (economists prefer calling it deflation).
According to Harsh Pati Singhania, President, FICCI: “Inflation rate has been coming down over time and these latest numbers are not entirely unexpected. However, the fact that WPI has come down to 0.44 per cent on a year-on-year basis, despite prices of food articles going up by 7.3 per cent on a yoy basis shows that inflation in case of other products has declined significantly. The high base effect also has a role to play in this case, as inflation stood at 7.78 per cent during the corresponding week of the previous year.”
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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…you must be joking! The decline in WPI-led index for inflation is not good news at all for the common consumers, as the numbers are manipulated, says Gyanendra Kumar KashyapBreaking News: Inflation is at a historic low! Head to the nearest vegetable vendor and you feel cheated by the news, and perhaps all the more by your very own interpretation of the statistic called inflation. True, the headline inflation numbers have come down ‘drastically’ but has it translated in some respite for the common consumers (aam aadmi – if you so please)? Do a reality check and you will get your answer – a big No! The inflation index – WPI (wholesale price index) – as displayed on your television screen is a flawed measure; it conceals more than what it reveals, like all good statistic. Whether in urban centres or in the rural heartland, at the retail level the current inflation is well over 10 per cent and not 0.44 per cent as the Breaking Newswallahs attempt to put it.
There are three kinds of falsehoods – lies, damn lies and statistics. Statistics on inflation are manufactured at the government factory (read Commerce Ministry), especially when the stakes are high. So, when the government pegs the current inflation as ‘a mere statistic’ at 0.44 per cent (statistically a historic low), one is left to wonder whether even today the Indian audiences are educated enough to see through this lie.
As the WPI touches that so called historic low, thanks to easing fuel prices, falling global commodity prices, policy measures such as a cut in duties and interest rates and most importantly, the high base effect, the disjunct between the two measures of inflation, viz. WPI and CPI (consumer price index) becomes all the more vivid. The low inflation rate, however, has not at all translated into low prices for items consumed by the common man. And here is the catch: declining headline inflation does not necessarily imply prices coming down. It only implies that the rate at which the prices of goods were rising has become slower. So when one hears that inflation is down to 0.44 per cent, what it really implies is that the prices today are higher by 0.44 per cent as compared to the prices on the same day a year ago. That’s a harsh reality many of us would not agree to accept. In fact, the prices will come down only when the inflation numbers turn negative (economists prefer calling it deflation).
According to Harsh Pati Singhania, President, FICCI: “Inflation rate has been coming down over time and these latest numbers are not entirely unexpected. However, the fact that WPI has come down to 0.44 per cent on a year-on-year basis, despite prices of food articles going up by 7.3 per cent on a yoy basis shows that inflation in case of other products has declined significantly. The high base effect also has a role to play in this case, as inflation stood at 7.78 per cent during the corresponding week of the previous year.”
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM 4Ps Quiz- Shahrukh Khan Video
IIPM - Most Innovative B-School
IIPM Best B-school
IIPM
IIPM Global B-School
IIPM Alumni Officially on Facebook
IIPM 4ps Quiz
IIPM: History, and Founder Director Dr. M.K. Chaudhuri
IIPM New Delhi, The Indian Institute of Planning and Management, India
IIPM Placements New Delhi, India
IIPM New Delhi India
IIPM MBA Institute India
IIPM - International
Business and Economy - India's Most Influential Business and ...
Rankings IIPM, The Indian Institute of Planning and Management India
Management Certification, IIPM India
(IIPM) Management Education Institute India
Moneycontrol >> News >> Press- News >> IIPM ranked No1 B-School in ...
» IIPM ranked No1 B-School in India :: Education, Careers ...
The Hindu Business Line : IIPM placements hit a high of over 2000 jobs
Deccan Herald - IIPM ranked as top B-School in India
India eNews - IIPM Ranked No1 B-School in India
IIPM Delhi - Indian Institute of Planning and Management New Delhi ...
domain-b.com : IIPM ranked ahead of IIMs
IIPM makes business education truly global-Education-The Times of ...
