Decline in inflation largely benefitting the poor: PHD Chamber

Decline in inflation largely benefitting the poor: PHD Chamber

Decline in inflation largely benefitting the poor: PHD Chamber

 

No.PR-187
February 6, 2016
New Delhi
 

Decline in inflation largely benefitting the poor: PHD Chamber
 

Degree of differential between inflation in items used by comparatively rich people and items consumed by comparatively poor people revealed that the comparatively rich are still bearing high burden of inflation though there is a significant decline in WPI inflation, said an analysis of PHD Research Bureau, the research arm of PHD Chamber of Commerce and Industry.
 

The impact of price rise as measured by the WPI is found higher on comparatively rich at around 8.2% as compared with the comparatively poor at around (-)4.4% in 2015, said Dr. Mahesh Gupta, President, PHD Chamber in a press statement issued here today.
 

The deceleration in inflation is largely welfare inducing as the decline in inflation had a positive impact on comparatively poor people as compared to comparatively rich people, he said.
 

Impact of inflation among comparatively poor and comparatively rich groups

S. No

Items(used by the comparatively poor)

Inflation (%)

Items(used by the comparatively rich)

Inflation (%)

1

Potato

-34.9

Fruits

0.7

2

Rice

-1.3

Pulses

55.6

3

Fodder

5.02

Cashew nut roasted

5.1

4

Kerosene

-4.03

Air Conditioner & Refrigerator

-0.2

5

Bidi

0.4

Cigarette

4.3

6

Bicycle

0.06

Motor vehicles

1.2

7

Toilet Soap

0.85

Perfume

2.5

8

Antacid

-1.5

Coffee

-4.03

 

Average inflation (%)

(-)4.4

Average inflation (%)

8.2

Source: PHD Research Bureau, compiled from Office of the Economic Adviser
 

Note: The data pertains to increase in inflation in each commodity in 2015 (Calculated on WPI Index in December 2014 and December 2015) 
 

The average inflation for items used by comparatively rich people such as Air conditioner & refrigerator, Cashew nuts roasted, Cigarette, Coffee, Fruits, Motor Vehicles, Perfume and Pulses stands at 8.2% in 2015.
 

Interestingly, exorbitant price rise is witnessed in Pulses at 55.6% which is higher than inflation in Cigarettes at 4.3%. The significant rise in prices of Pulses is primarily responsible for impact on comparatively rich people.
 

Further, significant price rise is witnessed in Cashew nut roasted (5.1%) and Perfumes (2.5%) which have led to high inflation for luxurious items used by comparatively rich people.
 

On the other hand, the average inflation for items consumed by comparatively poor people such as Antacid, Bidi, Bicycle, Fodder, Kerosene, Potato, Rice and Toilet Soap stands at (-)4.4% in 2015.
 

Among the items consumed by the comparatively low income group, significant deflation is witnessed in prices of Potato at (-)34.9% apart from Kerosene, Antacid and Rice which has led to significant decline in inflation in commodities consumed by comparatively poor people.
 

Though there has been decline inflation in the last one year, headline and retail inflation have started to rise in the last few months.
 

WPI inflation has increased from a low of (-)5.06% registered in August 2015 to (-)0.73% in December 2015 while CPI Inflation has increased from a low of 3.7% registered in August 2015 to 5.6% in December 2015.
 

Inflation in India can be tackled only by having a major focus on agriculture sector reforms to diversify the crop pattern, enhance productivity, increase in irrigation facilities and seed technology to mitigate the food inflation in the coming times, said Dr. Mahesh Gupta.
 

The issue of inefficient supply chain management in the agriculture sector needs to be taken care of so as to serve the food demand in the country. Poor infrastructure in terms of inadequate road, railway and port network is India’s biggest supply chain challenge, he said.
 

Absence of sheltered warehouses and cold storage facility to store food grains and fruits & vegetables which leaves agricultural produce rotten and spoiled is another issue which needs to addressed at the earliest, added Dr Gupta.
 

The government needs to upscale public sector investments in agriculture infrastructure to improve the supply chain and timely delivery of food products to general public to avoid any sudden escalation in the prices of food items, said Dr. Gupta.
 

Ends.

Koteshwar Prasad Dobhal
Consultant (PR)