The government on Friday released data on a new consumer price index for the entire country, which could provide headline inflation numbers over a period of time — as is the practice in several countries.
The data showed that retail prices rose by 6 per cent in January, against the average price level in entire 2010, and that prices rose slightly more in rural parts than in urban areas.
However, as the ministry of statistics & programme implementation pointed out: “Since these indices are being introduced for the first time, annual inflation rates have not been compiled.” Also, not all states have sent the adequate number of price schedules, the ministry added.
Taking 2010 price levels as the base (100 points), the all-India consumer price index stood at 106 points in January. For rural and urban areas, it stood at 107 and 104 points, respectively. (Click for the graph)
Retail prices in the food, beverages & tobacco group rose by 8 per cent in January, compared with the average price level last year. The fuel & light group was dearer by 6 per cent; clothing, bedding & footwear by 7 per cent; and the miscellaneous category (including primarily services) by 4 per cent.
In rural areas, food, beverages & tobacco prices were up 8 per cent, against 7 per cent in urban areas; fuel & light up 7 per cent against 5 per cent; miscellaneous up 5 per cent against 3 per cent; and clothing, bedding & footwear up 7 per cent in both areas. The housing index remained at 100 points for urban areas, while this category is is not included in the index for rural areas.
Within the food category, fruit prices rose the most, at 12 per cent all-India, while pulses declined the most, by 3 per cent.
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Economists cautioned that the new index numbers should not be interpreted in haste. “We have to wait for a long series to interpret numbers,” said Sujan Hazra, chief economist at Anand Rathi Financial Services.
The new data is quite an improvement over the segmented retail price numbers currently being released. There are at present three separate indices: For industrial workers, rural labour and agricultural labour. It is also an improvement over the wholesale price index (WPI), which does not cover services, the highest contributor to India’s GDP. (Click for the table)
Hazra said the new index is in line with global trends, as most countries use their retail price index as headline inflation. In India, changes to WPI are taken as headline inflation. “Over a period of time, this new index will become headline inflation for India,” Hazra added.
If that happens, both the government and Reserve Bank of India will focus their policies on retail price inflation, rather than WPI. “CPI numbers are widely used as a macroeconomic indicator of inflation, as a tool by governments and central banks to target inflation and monitor price stability, and as deflators in national accounts,” the ministry stated.
The index is, on average, composed of 225 commodities in rural areas and 250 items in urban areas, but the items differ slightly from state to state, depending on their consumption pattern. Around 20 services are also included in the index.