Inflation in negative- Really ?

If you’ve been wondering why prices burn a bigger hole in your pocket each time you go grocery shopping even as the inflation rate stays firmly negative, here’s part of the reason: The official wholesale price index (WPI) tracks stuff you don’t buy, not unless you are caught in a time warp.

Time was when middleclass families across India cooked with Dalda or Rath brands of vanaspati oil. When toasts were raised with Double Horse whisky or Old Port Dix Rum. When scooters outsold motorcycles and teenaged girls ritualistically used Keo Karpin hair oil before stepping out. Consumer preferences have changed but the WPI remains stuck in the early 1990s. The base year for the current WPI series is 1993-94. It has 435 commodities in its basket, which includes 98 primary articles, 318 manufactured products and 19 fuel and energy sources as well as lubricants.

But the basket is completely out of sync with current consumption trends. For instance, the list of Indian Made Foreign Liquor has just five archaic brands. The same holds true for many other commodities, including manufactured goods and food items.

The WPI is illogical and outdated on other counts too, listing no other detergents but Sansar powder, manufactured in Bangalore and Surf made in Mumbai. This, even though HLL, which manufactures Surf, has factories in many parts of the country and does not base its price on products manufactured in Mumbai.
Similarly, the confectionery market has expanded but the WPI lists just 10 varieties of toffees manufactured by two brands - Parrys and Nutrine. Saridon is still the WPI’s brand of choice, as is Kolkata-based Deys Medical for personal grooming products such as hair oil.

The WPI basket no longer reflects market categories either. In 1993-94, pagers sold more than mobile phones as did scooters compared to motorcycles and cars. That’s not true in 2009.

The government says it’s hard to draw up a more representative list of products because of problems sourcing data from as many as 5,000 units. Therefore, it’s contemplating making it binding for companies to report monthly data. Once the new system kicks in, inflation data will be released on a monthly basis rather than weekly, as happens now.