Inflation in India is calculated as a wholesale price index of 435 goods over 1993-94, as base year. This is by far, a unique measurement of inflation by any nation in the world and suffers from some serious shortcomings. The index is often criticized for its low weightage to food items (22.02%), which form a large proportion of consumer spending in India.
After hitting a 16-year high of 12.9% in August last year, the index is hovering around 1.5% currently, which apparently is an indicator of relief from inflation. However, in the week ending November 14, the food inflation index touched 15.58%, explaining the backbreaking price rise for the average Indian consumer. The rise in the prices of pulses (35.6%), wheat (12.53%), rice (11.89%), milk (11.36%), and fruits (10.97%), over last year, indicate an imminent problem. The cost of vegetables has climbed, as much as 62.42% since the beginning of this fiscal.
RBI has revised its annual inflation estimates from 5% to 6-6.5% for the year ending March 2010. Indian agriculture is largely dependent on monsoon, even today. Therefore, a weak monsoon in the current fiscal is likely to put further inflationary pressure on the food prices, as India plans to make up for the supply deficiency through the import of rice. In addition, the extremely high proportion of food reserves in the Government’s possession (more than 5% of which is wasted every year) is also being blamed for the current food shortage and consequent price rise.
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nice article thanks for the info