I was quite excited almost a month back, once Inflation rate @ India touched almost at 0.0 levels. This is in saving anticipation due to regular household & groceries expenses. To my dismay, I found costing of most of the stuff @ market is inversely proportional to Inflation rate. Is it something to do with our inflation measure which is based on WPI? I find it very ridiculous when Inflation is at zero level and commodity prices at market are still going north-side.
I feel CPI should is very appropriate measure of Inflation. There are two reasons to support that logic:
- CPI impact is immediately visible to the retail consumers; unlike that of WPI which is in favor of produces
- Key contributor for CPI is ‘Food, beverages & Tobacco’ i.e. 47% (almost half of the CPI index); whereas in case of manufactured products composition is at 63% level. Any inflationary impact of manufactured product should be visible in few months; whereas ‘Food, beverages and tobacco’ impact is evident straight-away
Hopefully someday I will understand the economics. With current trend, I love to say “I hate economists theory’; rather always fail to understand 😉