21-Jul-2010

Inflation: Fixing The Base

Still talking about inflation, in today's papers Pranab Mukherjee predicts inflation will moderate by end-August:
Addressing a press conference here after a meeting of the Southern Chief Ministers, the Finance Minister said the assessment of inflation is dependent on what is taken as a base. The inflation during the year is about 5.5 per cent. While the food inflation was coming down, the recent fuel price hike has added to this.
Does Pranabda have an ace up his sleeve?  Looks like it, for close to the above article, we have this: New inflation index likely next month: DIPP Secretary.  
The Government is set to introduce a new inflation index, which would add around 250 more items, from next month.

“We are ready with the new index now. Most probably from next month we will start,” said Mr R P. Singh, Secretary, Department of Industrial Policy and Promotion (DIPP).

The present monthly inflation measurement based on the wholesale price index has 435 commodities but this figure would go up to 670 under the new index. The base year of the new index would also be changed from 1993-94 to 2004-05. The new index is expected to give a more realistic picture of the price rise and its impact on people.
By far the best way to fix inflation!  Will we see that inflation after all is not so high and that the impact on the people is minimal by August then? Can't wait to find out.

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