The Hindu Business Line : Inflation for ‘aam aadmi’ is only 7.1%

New Delhi, June 22 The wholesale price index (WPI)-based inflation rate scaling a 13-year-high of 11.05 per cent has put the Centre on the defensive and sent stock and bond prices into a tailspin. But what does it really translate into for the ‘aam aadmi’?

To put it differently, how reflective is the 11.05 per cent rate on the prices of items relevant to the common man’s consumption basket?

The WPI is a hotch-potch capturing price movements in 435-odd commodities that range from onions and ghee to titanium dioxide and carding machines. The 11.05 per cent inflation figure for the week ended June 7 is basically the weighted average year-on-year increase in the wholesale prices for all these 435 items.

What if one were to be more selective and examine the price rise of only those essential products directly consumed by the common man? The accompanying table gives the inflation numbers in respect of such ‘aam aadmi’ items, having a 26.32 per cent aggregate weightage in the all-commodities WPI.

The combined contribution of these essential products to the overall inflation works out to below 17 per cent. The underlying ‘aam aadmi’ wholesale inflation rate, too, works out to about 7.1 per cent, as against the headline-grabbing 11.05 per cent.

What is more, in the case of pulses, vegetables and drugs/medicines, the official WPI-based inflation is negative, while being zero or negligible for kerosene and electricity. It is only fruits, edible oils and liquefied petroleum gas that have recorded double-digit rates.

At retail level too

The above trends are also apparent at the retail level. According to the Consumer Affairs Ministry data, prices of onion and potato in Delhi on June 18, at Rs 10 and Rs 9.50 a kg, were lower than the corresponding Rs 11 to 12.50 levels of a year ago. Sugar prices have remained at Rs 17 a kg, while gram and milk have gone up from Rs 33 to Rs 35 a kg and from Rs 18 to Rs 20 a litre. It is only rice (Rs 15 to 19) and mustard oil (Rs 57 to Rs 81) that have seen perceptible increases.

If one were to further account for the fact that some commodities like rice and wheat — and from July 1, edible oils as well — are also sold through the public distribution system and their rates have not been revised for over five years, the overall inflation rate (both current as well as prospective) for the BPL families would certainly be even lower.

The current bout of inflation is being driven mainly by oil (both petro-based as well as edible) and iron & steel. Petro-products, with a combined weightage of 6.99 in the WPI, have caused 16.11 per cent of the overall inflation. The edible oil complex (having a total 6.84 per cent weightage, inclusive of oilseeds and oilcakes) has likewise contributed 14.7 per cent and iron & steel (3.64 per cent weightage) another 10.93 per cent.

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