Sunday, February 6, 2011

How to Measure Inflation in India?

NIPFP Working Paper 83
[PDF]

Ila Patnaik, Ajay Shah and Giovanni Veronese
February 2011

Abstract

What is the best inflation measure in India? What inflation measure is most relevant for monetary policy making in India? Questions of timeliness, weights in the price index, accuracy of food price measurement, and inclusion of services prices are relevant to the choice of measure. We show that under present conditions of measurement, the Consumer Price Index for Industrial Workers (CPI-IW) is preferable to either the Wholesale Price Index or the GDP deflator.

2 comments:

'Bade mian' said...

Nice article. However, why did you guys totally ignore the retail Index. You do mention UK using it as one of the indices. And your quote that: "...wholesale prices may record prices paid at various stages of the distribution chain: starting from prices of raw materials for intermediate and nal consumption, or prices of intermediate goods, to prices of fi nished goods up to the retail stage"

Does this mean the WPI does take care of retail prices completely?
If not, earlier the Retail Index was probably difficult to get info for. But with the organized retail in India, isn't that more easy to get now? And a more accurate representation of what the consumer ultimately pays?

Thanks

FC said...

For inflation in India, read this --

http://fairval.wordpress.com/2009/10/01/the-true-inflation-situation-in-india/