June 18, 2009

Why Wholesale Price Index (WPI) and not Consumer Price Index (CPI)?

Everyday paper and concerned agencies are declaring gradual decline in inflation but realty is just opposite when one go to market and buys goods of daily need. All products like aloo, pyaj, atta, rice edible oil all are becoming costlier day by day.
I feel there is something wrong in calculating this decrease in inflation, as per available information this decrease in inflation is based on Wholesale Price Index (WPI) and not on Consumer Price Index (CPI). Because it is the consumer who is facing the problem as the prices in the market are increasing and Banks are decreasing Interest rates due to this available decreasing statistics of decreasing Inflation. Normal consumer is facing the problem of reducing purchasing power, and government should do something about it.
I don’t think the decision of banks to reduce lending and deposit rates would solve consumer plight as rising prices of essential commodities are reducing purchasing power and disturbing his monthly budget. Whereas, distributors and retailers are making good margins.
If we consider Per capita income of Indian urban population and the prevailing prices of daily needs items and routine family expenditure of a middle class family situation is far from ideal. Rising prices making life difficult and government should think of changing the system for calculating Inflation. Government should fix some percentage for maximum difference between WPI and CPI so that chances of hoarding and black marketing can be avoided.

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