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Posted by on July 9, 2008, 6:57 am
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MUMBAI: Even as inflation measured by the wholesale price index (WPI)
has shot through the roof and
crossed the double digit levels, the common man has not felt the pinch
so severely. In May, the consumer
price index (CPI) for industrial workers, which reflects the price
levels for the common man, was 7.85%. The
average WPI inflation during the month was around 8.15%. In fact, CPI
dipped marginally in May over April=92s
7.75%. Interestingly, the CPI until earlier this year was higher than
the WPI.
This variation in the CPI and WPI is largely because of difference in
weightages assigned to different items in
the respective baskets. The food basket in the WPI has a weight of
22.02%, while a slightly modified basket of
food products in the CPI has a weight of 57%. Similarly, fuel group
has a weightage of 14.23% in the WPI, but
fuel and light have weight of only 6.28% in CPI. Besides, the WPI is
inflated also because of a sharp rise in
many items that are not used by the common man.
According to Edelweiss Capital economist Siddhartha Sanyal, of the
average WPI inflation of 8.15% in May,
weighted contribution of primary articles was around 200bps, that of
mineral oils was 136 bps, metals 200 bps
and chemicals about 60 bps. Of this, consumer prices are impacted less
from price rise of chemicals, fuel and
metals due to their comparatively lower weights in the CPI.
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