But no, that hasn't happened. Inflation, surprisingly, has been on the decline.
Official estimates reveal that the overall rate of inflation, when calculated on the basis of the Wholesale Price Index (WPI), peaked at 8.69 per cent for the week ending September 26 and went under eight at 7.98 per cent for the week ending October 17—the latest figure released by the government. This is the third time this year that the inflation rate has gone below the 8 per cent mark (it had earlier dropped below this level for the weeks ending June 28 and August 8).
While the government feels the main reason for the rise in inflation since August is the increase in onion prices and its cascading effect on all other commodities and food products, the current reprieve is primarily because of a drop in the prices of rice, barley, jute, fruits and some primary commodities which have a considerable weightage on the WPI.
The end result is still a bit surprising, considering that there has been an unabated increase in the price of food items and vegetables over the past two months despite the best efforts of the government to tame this upsurge. In October alone, the price of most vegetables and commodities rose constantly. The price of primary articles rose by more than 16 per cent. Within this, the price of food articles rose by 21 per cent, out of which vegetable prices registered an unprecedented increase of 114.4 per cent, more than that recorded during the Emergency in 1977, while cereals (12 per cent), animal proteins (8 per cent) and milk (13.7 per cent) also saw substantial increases in price.
Experts feel the decline in inflation has more to do with the way inflation is calculated rather than a (non-existent) fall in prices. For the common man, the Consumer Price Index (CPI) is a more efficient indicator of the level of inflation, but the government always publicises the WPI-related calculations. This does not give the correct picture at the grassroots level. Says economist D.H. Pai Panandiker: "Since this inflation is WPI-related and is compared with last year's price movement, the rate given here may be totally different from the actual inflation or the general price level."
Economist Shubhashis Gangopadhyay agrees. "The price rise that we see is in non-industrial goods—which is not considered in computing our inflation—and the weights in Wholesale Price Index and Consumer Price Index are totally different," he says. "And much of this food price increase is at the traders' level which will not affect WPI-led inflation. In this, several manufacturing goods are usually taken into account and when your entire industry has been in the throes of a severe recession for several months, inflation on this basis is ought to show a decline."
Interestingly, inflation as calculated on the basis of the CPI has constantly stood at about 15-16 per cent since May this year and hovered around 16.3 per cent in September. Given the prevailing price level, this is expected to go still higher in the months to come.
However, some experts feel most of today's inflation is temporary, unreal, politically motivated and manipulated to show the government in poor light. Says Pai Panandiker: "This is not exactly an economic phenomenon. It has a strong political bias. The kind of short ages we have do not warrant this kind of a price rise. Only consumption items used by the common man have been affected and the price movement in these inevitably have a distinctive impact on the voting pattern. Coming before the state elections, this is not a surprise." Most of them are of the opinion that since the government figures have a three-week backlog, the picture in the immediate future could be a scary one. Although the WPI-led inflation may stabilise around the 8 per cent figure, the steep price situation would certainly push CPI-led inflation up further to around 17-17.5 per cent.
The government, in the Union Budget, pledged to peg inflation around the 6-6.5 per cent level to run along its GDP growth target of 7 per cent for the year. But the unexpected turn of events leading to the unprecedented increase in prices seems to have neutralised its efforts. Unless it takes some concrete measures to control prices, its ambitious target will remain a far cry.
