Inflation calculation in India- never gives true picture

Every media highlights downturn in inflation in recent days. It could be due the peak level we have witnessed in last few months, also due to the political reason- approaching general election. Today's news papers read "inflation at 6 years low at 2.4%". This could make you feel the prices have gone down and no need to spend more. Still it means the prices index that too wholesale price index is at 2.4% higher than what it was one year ago. Then what does the explanation "inflation gone down" means? It just means the rate of increase compared to last last week has gone down. But there is rate of increase. So until when there is +ve inflation (simply- inflation) you have to open your wallet more than what you were doing last year. Only when inflation is -ve (deflation) we can tell prices has gone down. Both are not good economics. There should be a stability.

With this come to the method of calculation of inflation in India. In India we use wholesale price index - WPI. It covers about 435 commodities in 3 groups- 1- primary articles, 2- fuel, power and lubricants, 3-manufactured products. These are given weightage for calculation as 22.03%, 14.25% and 63.75% respectively. WPI is calculated as point to point raise in prices i.e. comparing recent WPI to a point of time in past, that is a year ago. This method has two disadvantages- as it is calculated year to year basis, the seasonal prices can mislead the calculation, secondly, most important disadvantage is as it is based on WPI, it will not give true picture of consumer prices.

As in other countries India should also adopt CPI for measurement of inflation. A common man won't buy goods at whole sale price. Whole saler won't transfer complete downturn of price to consumer. Hence whole sale price index is a way of misleading the people. Even the WPI of some commodity drops at 20% CPI hardly drops 10%. So even when the inflation rate based on WPI is at 2.5%, inflation based on CPI could be 10%. In January, when the inflation was at the rate 3.03%, CPI for working class was 10.45%, for agricultural labour it was 10.62% and for rural labourers it was at 11.35%. Think how we are made fools!!