India Misleads on Inflation Figures

A very big fraud has been happening right under our nose in India and we were all taking False Claims of Indian authorities all this while.  

Almost every Friday Since last 7 months we are cheering up that Indian inflation is coming down. Is it really true? Prices are going up like anything.

India calculates its official inflation based on Wholesale Price Index (WPI) rather than Consumer Price Index (CPI) based inflation. WPI is never an indication of the inflation simply because the consumers do not buy from wholesale markets. They buy at retail level. Most economies like US, UK, Japan, France, Singapore, and China etc. have selected CPI as its official barometer to weigh its inflation. And hold your breath even Pakistan follows CPI. (And all that while you laughed at high inflation in that country).

But our country, India, is amongst rare countries of the world, which uses WPI as its official scale to measure the inflation in the economy. Simply because WPI is always lower than CPI, thereby painting a false picture to the electorate that prices have fallen. So figures of 2.63% as claimed by Indian authorities are untrue. As per CPI our inflation figures stand at 10.5% in January up from 9.7% in December. Now you can make out the huge difference between WPI and CPI, 6.5%!

If that is the reason why CPI is being used by Indian authorities? I see two main reasons.

1. Since WPI figures are always lower than CPI, the innocent public of India is fooled into believing that prices are coming down and hide the actual price rise on the pocket of consumer.
2. WPI index tells us about commodity producers, manufacturers, bulk sellers and market owners. A low WPI is an indication to them that their selling prices rate is decreasing and gives them all good reasons to raise the wholesale prices. After all money for elections come from these rich people.

If we see Academically also the WPI calculation in India is flawed.

1^st Flaw - At least 1,918 quotations should be received for assessing changes in WPI but Indian authorities invite not more than 1200 quotations. So price information is not even.

2^nd Flaw – From 435 commodities in WPI , more than 100 are no more important from consumer point of view so the price fall in these 100 commodities does not really affect the Indian consumers.

3^rd Flaw - There is a huge difference between the provisional and final index figure!! Once in April 12, 2008, the provisional figure of inflation was 7.33, which were revised as final inflation figure of 7.95 what a healthy error!!

4^th Flaw - WPI measures the general level of price changes at the level of either the wholesaler or at the producer and does not take into account retail margins. WPI does not reflect the actual price hike, which the consumer is paying.

5^th Flaw - Service sectors are not duly accounted in WPI. Service sector like health and education are important as consumers are increasingly spending more money on these items. So if education fee goes up or Doctor fees goes up, it doesn’t matter to Indian government.

6^th Flaw - WPI measures the price changes from the production side and never from the consumption side It is surely a lop sided viewpoint of consumers.

Besides all these Frauds Indian Authorities will thump their chests at bringing down the Inflation. That’s what I call 'Shamelessness'