20 October, 2020

Their Precious Puzzles

WPI, the official barometer to measure inflation, doesn't reflect retail realities

R. Prasad
Their Precious Puzzles
  • When WPI comes down, it does not mean prices are declining; it merely signifies that prices are going up at a slower rate.
  • The weightage of primary articles (including food items) has come down from over 40 per cent to over 20 per cent; this means that the rise in prices of food items has little impact on the index
  • WPI does not reflect changing consumption patterns; it totally omits services
  • What's relevant for consumers is the CPI, not WPI; CPI reflects the change in retail prices

Inflation is one economic phenomenon that directly affects every citizen. Not surprisingly, politicians dread inflation, for it inevitably translates into popular resentment. Over the decades, the prices of sugar and onion have become symbols of voter anger against several incumbent regimes. So, when on June 22, 2007, Union finance minister P. Chidambaram—already under attack from his party colleagues, political opponents and Communist comrades for failing to rein in prices of essential...



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