The hidden dragons in crouching inflation numbers

Tina Edwin New Delhi | Updated on January 09, 2018

In recent weeks, prices of air tickets and kerosene have zoomed

Food prices have dropped, but many items/services have turned expensive

Even as the headline consumer inflation number saw its slowest rise in recent months, thanks mostly to falling food prices, inflation for many items and services has risen in double digits.

These include items and services that are consumed by both masses and classes and range from economy class airfare, hotel and lodging tariffs to steamer cherges and kerosene prices.

The Consumer Price Index rose a slow 2.18 per cent in May, 1.46 per cent in June and 2.36 per cent in July with the consumer food price index growth declining. Disaggregated CPI data for July 2017 show that economy class airfare climbed 34.6 per cent on a point-to-point basis while kerosene sold through the public distribution system (PDS) recorded 31.2 per cent rise that month.

Inflation for both airfare and kerosene has been in double digits all through this fiscal year. While airfare is largely a function of market economics, the rise in kerosene prices can be explained by the fortnightly 25 paise increase in its selling prices. The government had allowed oil marketing companies to raise kerosene prices incrementally last year in a bid to phase out subsidy on the fuel.

Double-digit increase was also recorded in fares for steamers and boats, hotel and lodging charges, and prices of gas burners and small household electric appliances.

Steamer fares climbed 17.4 per cent, hotel and boarding charges by 15.6 per cent, and gas burners by 15.1 per cent. Electric appliances reported 11-12 per cent rise. Even horse-cart fare was up nearly 10 per cent in July compared to the same month last year. Charges paid for services used across classes such as to porters, tailors, barbers/beauticians, doctors, and hospital and nursing services climbed 6-8 per cent in July compared to a year ago. Services of domestic helps, cooks and washermen climbed more than 5 per cent. Private coaching and tuition services too became about 5 per cent dearer.

While many of these items and services are more expensive compared to a year ago, they are not necessarily more expensive than a few months ago.

The index reading for airfare for July, for instance, is much lower than it was in May, the peak holiday travel season. Likewise, the index reading for steamer fares is lower for July than it was in May. Hotel and lodging is much lower than it was in April but higher than May and June — all indicating price movements in response to demand.

Porter charges dip

Porter chargers also fell in July after rising for three months, but horse-cart charges have been rising the past three months, as also for tailors, barbers/beauticians, domestic helps, cooks and washermen.

Comparison of the index readings for January and July show kerosene prices have risen 18.2 per cent since January, steamer fares by 17.1 per cent, gas burners by 15.5 per cent, small electric appliance by 10.5 per cent, and hotel and lodging charges by 8.4 per cent.

Published on August 21, 2017

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