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Dipping WPI may impress govt

Dipping WPI may impress govt
The dropping wholesale price index (WPI) may be of little interest to the common man and India’s 100 million industrial and services sector workers, who are struggling like never before to meet their daily dire necessities in the face of continuously rising retail prices. Already high and still rising food prices are a major cause of worry. The consumer price index for industrial workers (CPI-IW), what really matters to ordinary people, is rarely released in public with similar fanfare. Apart from sky rocketing retail food prices, an equally increasing cost of medicine and medical treatment and higher outgo on education are constantly putting extra pressure on the working class and the poor. Falling petrol and diesel prices, which have been mostly behind the downward WPI, have little impact on the common man’s pocket. Low petroproduct prices have not even reduced the cost of travel by public transport though they have come as good news for the automobile industry, automobile operators, car owners, the government and the petroleum processors using mostly imported crude oil. Falling WPI is not helping improve the quality of life of workers, the low-income group and the poor.

The release of the WPI index last week focused on price deflation persisting for a 14th straight month in December. The official release pointed at the longest running overall deflation in the recent memory. It even surpassed the 40-year old record of 1975-76 when WPI based price fell for a full year. The present WPI index last showed inflation in October 2014 at 1.66 per cent. The common man only wished that the WPI trend also reflected on consumer price index (CPI). In the past, WPI for a year had often shown a much faster growth than corresponding CPI numbers. Frankly, WPI inflation is not an appropriate index to determine the impact of price rise on the cost of living of the common man. Rather, Consumer Price Index for Industrial Workers (CPI-IW), which also includes selected services and is measured on the basis of retail prices, and is used to determine the dearness allowance of employees in both the public and private sectors, is the appropriate indicator of general inflation. Food items carry higher weights in CPI-IW than in WPI. Industrial workers’ unions and the Reserve Bank of India know this very well.

In fact, WPI for last month would have fallen much further than 0.7 percent had it not been for food inflation in the wholesale trade which rose to 8.17 percent, the steepest for 17 months. RBI, which control inflation and money supply with the public (M3), is worried. Top economists, including those in RBI, are against a further rate cut for the benefit of industry and business persons. Anyway, the four previous bank rate cuts failed to raise industrial investment in the country, especially from the private sector. The persistent WPI drop has been of little help to stabilise the value of our currency, Rupee. The international trade gap continues to be huge against India. The drop in the value of rupee makes imports more expensive and export cheaper. Either way, the common man, and workers suffer. The cost of import is passed on to consumers. Cheaper export may be good for exporters, but workers are put under greater stress to produce more for same wages.

The CPI inflation in December 2015 rose to 5.61 percent against 5.41 percent in November. Retail food inflation alone rose 6.4 percent. However, retail market rates, unlike wholesale prices, vary from markets to markets even in the same city or district. Therefore, CPI-IW rates could also be logically different. The reliability of official statistics is often a suspect. Higher retail inflation eats into the income of the common man, a small percentage of whom get dearness allowance from employers. Even DA hardly covers the real impact of retail inflation on an employee’s pocket. Ironically, despite constant retail price hikes, the retail sector is continuously growing riding on income growth of another section of consumers, the middle and upper middle class. The number of latter is surging due to rapid urbanisation and the growing number of nuclear families. The industry body, CII, and the Boston Consultancy Group have lately projected that India’s retail sector will jump from $630 billion in 2015 to $1.2 trillion in 2020. It is difficult to predict how this will impact the country’s working people; the world’s second largest after China and also among the most exploited lots.

That India’s growing GDP and development have added little to the quality of life of its people are a major concern. Inflation continues to be a key factor. The country continues to rank low in the Human Development Index (HDI), climbing just one notch to the 130th rank in the latest UNDP report on account of rising life expectancy and per capita income. India ranked 130 among 188 countries in Human Development Report 2015 by the United Nations Development Programme (UNDP). The ranking was for the year 2014. India’s rank has moved from 131 in the previous year to 130. India’s HDI rank between 2009 and 2014 had risen only six positions. The HDI rank of Bangladesh and Pakistan was 142 and 147, respectively. Among the BRICS nations, India’s is the lowest. The rising retail inflation and falling real value of income of the majority of the country’s population appear to be among the key reasons. Maybe, India’s NITI Ayog can throw some light on how the rising retail inflation impacting the quality of life of a vast majority of its people.

(The author is a senior political commentator. Views expressed are strictly personal)
Nantoo Banerjee

Nantoo Banerjee

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