After repeated criticism of the irrelevant application of the western concept of "core inflation" in the wholesale price index (WPI) the Reserve Bank of India (RBI) gave it up. Instead, it has used the term "non-food manufactured products inflation" from the Annual Policy Review for 2013-14 onwards. I am surprised to find, in some recent statements of the authorities, a reference to the core inflation again now in the consumer price index (CPI), obviously relating to non-food products and services. The CPI should be considered core inflation with about 60 per cent of the weights assigned to the two groups: food, beverages and tobacco and fuel and light for all-India and 70 per cent and 45 per cent for rural and urban areas, respectively. Their shares may be even higher now in total consumer expenditure since 2010. It is time the RBI shifts its focus to CPI, even though it may continue to take cognisance of trends in other indicators such as WPI.
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A Seshan Mumbai
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number