Indian sugar mills association

January consumer inflation at 7.65%, shows new tracker

Date:	22 Feb 2012

Source:	The Economic Times

Reporter:	ET Bureau

News ID:	930

Pdf:	tracking of price changes.pdf
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NEW DELHI: India released its first national measure of retail inflation on Tuesday, filling a vital gap in data collation that will help sketch a more realistic picture of price movements for policymakers.

The composite index, which aggregates rural and urban indices, showed consumer prices rose 7.65% in January from a year ago.

The government had announced a retail gauge of prices in January last year to measure changes in five main consumption items: food, fuel, clothing, housing and education.

The new index showed the rate of price rise in urban areas was faster at 8.25% compared to 7.38% in rural areas.

"This fills an important gap in the price monitoring system. This has been a long-standing request of the researchers and policymakers and was also one of the strongest recommendations made by the National Statistical Commission under Dr C Rangarajan," said NR Bhanumurthy, macroeconomist at NIPFP.

The wholesale price index, which measures prices at the producer level, has been the most widely watched measure of inflation in the absence of an accurate gauge of changes in prices at the retail level.

Until now the government had been releasing narrow retail indices - consumer prices index for agricultural labour, rural labour and industrial workers. But the data quality of these indices is suspect.

The new index also measures changes in prices of some services (housing, education and recreation), which have a nearly 60% share in the GDP.

The index is expected to replace the WPI as the headline inflation measure once sufficient data history is available.

The retail inflation, as measured by the new index, is nearly two percentage points higher than the wholesale inflation, now at 6.55%.

"The combined CPI data shows that inflation is uncomfortably high even as inflationary expectations remain elevated," said Aditi Nayar, economist with rating agency ICRA.

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