Inflation... a household perspective; a case for CPI

http://epaper.business-standard.com/bsepaper/svww_zoomart.php?Artname=20111109aE006101003&ileft=236&itop=153&zoomRatio=130&AN=20111109aE006101003


Inflation: The Hot Topic of discussion in all financial newspapers as well as dailies; stating 9 - 10% figures; food inflation in the range of 15% or thereabouts... They further state that this has been  a problem for the past 2 years only

I have just one point to make in answer: In Jabalpur, in the year 2004 - 2005, our groceries bill per month from the local supermarket was 1000 rupees. Today, it is 2500 rupees. Milk was Rs. 18 in that year; today I am shelling out Rs. 33/-. On groceries, a simple calculation will tell you that it works out to 20% over the past 7 years, and 17% on milk over the past 7 years

You can do this calculation over any number of household products; the results will be extremely disturbing. Now these are hard figures and facts, and are incontestable. As to the reason for grocery bills  and milk as examples, this is to ensure that no errors creep in. For other products - clothing, for example, the expenses will naturally rise over time due to a rise in standard of living. But the Milk - a per litre costing - this is independent of that factor. Similarly, groceries can be considered to be a stable comparison as long as the size of family is the same over the period of comparison. We were a family of 3 then, and we are a family of 3 now. Our food habits have remained largely the same - we are procuring the same tur daal, moong daal, aata, biscuits, soaps etc. 

One reason could be that we are measuring WPI inflation - wholesale inflation. Another reason could be that the product basket that is measured as a part of the WPI inflation calculation and their relative weightages need to be re-looked at. Whatever be the reason, the fact of the matter remains that we are not capturing the true on-field scenario.

We are simply not capturing consumer - level data, unlike the developed economies, wherein this is reglularly tracked and monitored as a matter of course. We need to develop systems to capture CPI - consumer price indexed inflation. This seemingly simple task is actually quite a tall order given that this would require capturing on-store sales data across the marked product categories in a scenario when most stores do not even cut proper bills of sale

Now, there is a simple way out that occurs to my admittedly untrained eye: there are now superstores and departmental stores which regularly capture consumer data as well as bills of sale on central information systems. This was not the case even 5 - 7 years ago, when such stores were mostly in top-10 metros in our country; even in the smaller cities they were present only in creamy-layer dominated areas. But today, this is not the case since such LFRs and MFRs (Large Format Retail / Modern Format Retail stores) are scattered through most of the major cities. Hence, we can have access to representative data. All it now requires is someone in authority to think of this, since I dont think the above is all that impractical


The only objection I can think of is that this would cover only consumer products, and the other categories are left out in the cold. To that extent, that is accepted as a shortcoming. But, if you think about it, the data for such categories would be far simpler to collate once the major voluminous consumer data is collated. Secondly, the impact of technology must also have been felt in that sector as well, and can be harnessed. One thing is sure, though: if we want representative and accurate data for our economy we will firstly have to harness technology, and secondly we will have to do it fast

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