Food prices rise much more than WPI

EFFORTS TO CONTROL PRICES: A DAY AFTER CABINET MEETING

The price rise in individual key food commodities over the last one year is significantly higher than what is conveyed by the wholesale price index.

While the latest government data show inflation at 6.68 per cent for the week ended March 15, the price change in most food items is in double digits.

The biggest rise is in mustard oil and vanaspati, of 43.63 per cent and 41.07 per cent, respectively. In the same period, rice and tur became dearer by 20 per cent, gram prices moved up by 18.75 per cent and milk became costlier by 11.11 per cent. Only wheat showed a single-digit rise of 8.33 per cent.

However, sugar prices have remained unchanged. Prices of most items have been moving up due to supply-side constraints, analysts say.

But these are not reflected in the inflation data because of the small weight of these commodities in the index. Milk carries a weight of 4.37 per cent in the WPI while sugar of 3.52 per cent (this is contested by the sugar industry, which claims the figure is much lower), rice (2.45 per cent), edible oil (2.76 per cent), wheat (1.38 per cent) and pulses (0.60 per cent).

"The primary articles group (which includes food items) has a weight of just 22.02 per cent so a slow rise in prices under the manufactured articles group (with 63.75 per cent weight) ensures that the overall WPI remains low," said an economist.

It is often argued that WPI does not truly reflect inflation as it takes into account only wholesale prices. But even the consumer price index (CPI) data for the period between February 2007 and February 2008 (the last available data) do not show the true picture.

The All-India CPI (urban non-manual employees) for February 2008 is 523, 5.2 per cent up over February last year.