Inflation In India

India’s 2008 Economic Survey Report targeted a drop in India’s Inflation Rate – but with food, oil and commodity price rises worldwide, the opposite is happening. According to the 2008 Economic Survey Report, India’s inflation rate was targeted by the Reserve Bank of India (RBI) to be 4.1%, down from a rate of 5.77% in 2007. Inflation rates for many investment goods have decreased dramatically in recent years.

The price of basic goods such as lentils, vegetables, fruits and poultry were expected to slow their rise. The price of various manufactured goods also fell in 2007, and this contributed to a reduced inflation rate. However, the beginning of 2008 has seen a dramatic rise in the price of rice and other basic food stuffs. There has also been a no-less alarming rise in the price of oil and gas. When coupled with rises in the price of the majority of commodities, higher inflation was the only likely outcome.

Inflation has climbed steadily during the year, reaching 8.75% at the end of May. There was an alarming increase in June, when the figure jumped to 11%. This was driven in part by a reduction in government fuel subsidies, which have lifted
gasoline prices by an average 10%. The Indian method for calculating inflation, the Wholesale Price Index, is different to the rest of world. Each week, the wholesale price of a set of 435 goods is calculated by the Indian Government. With the BRIC countries (Brazil, Russia, India and China) alone accounting for more than 3 billion people, and with these people consuming more resources every year, it is likely that higher inflation rates will be with us for a good while yet – and that is worrying news for the government of India.

BRIC (Brazil, Russia, India and China) :Economies of the BRICs are rapidly developing and by 2050 will eclipse most of the current richest countries of the world.

Calculating inflation in India:- In India inflation is calculated and announced on Fridays. India uses the Wholesale Price Index (WPI) to calculate and then decide the rate of inflation in the economy. WPI is the index that is used to measure the change in the average price level of goods traded in wholesale market. In India, price data for 435 commodities is tracked through WPI which is an indicator of movement in prices of commodities in all trades and transactions. Since these are wholesale prices, the actual prices paid by consumers are far higher.

Current inflation rate in India:- July 2008, the key Indian Inflation Rate, the Wholesale Price Index, has risen above 11%, its highest rate in 13 years.