INFLATION RATE IN PERCENT

FOR JAN 2000-PRESENT

Our Inflation data (see table below) is calculated to two

decimal places while the government only calculates to
one decimal place. Therefore, while being based on the
government's index our data provides a "finer" view.
January and February 2005 is a perfect example,
according to the government statistics both months had
an inflation rate of 3%. In January however, our data
shows it as 2.97% and February shows as 3.01%.
Therefore instead of the inflation rate being "flat" it is
actually rising slightly. In another example we see
August 2003 and September with the Government
saying the rates were 2.2% and 2.3% respectively. This
would lead us to believe that inflation rose .1% during
that period. In actuality however, it rose from 2.16% to
2.32% or a .16% increase, substantially more than .1%!

The Inflation table below is updated monthly and

provides the current US Inflation Rate plus Monthly
Inflation Rate data back to January 2000. The Inflation
rate is calculated using the Current Consumer Price
Index (CPI-U) published monthly by the Bureau of
Labor Statistics. CPI Index Release Dates

Menu navigation is available on the menu bar on the left of every

page.

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ave
2009 0.03% 0.24% -0.38% -0.74% -1.28% -1.43% -2.10% NA NA NA NA NA NA
2008 4.28% 4.03% 3.98% 3.94% 4.18% 5.02% 5.60% 5.37% 4.94% 3.66% 1.07% 0.09% 3.85%
2007 2.08% 2.42% 2.78% 2.57% 2.69% 2.69% 2.36% 1.97% 2.76% 3.54% 4.31% 4.08% 2.85%
2006 3.99% 3.60% 3.36% 3.55% 4.17% 4.32% 4.15% 3.82% 2.06% 1.31% 1.97% 2.54% 3.24%
2005 2.97% 3.01% 3.15% 3.51% 2.80% 2.53% 3.17% 3.64% 4.69% 4.35% 3.46% 3.42% 3.39%
2004 1.93% 1.69% 1.74% 2.29% 3.05% 3.27% 2.99% 2.65% 2.54% 3.19% 3.52% 3.26% 2.68%
2003 2.60% 2.98% 3.02% 2.22% 2.06% 2.11% 2.11% 2.16% 2.32% 2.04% 1.77% 1.88% 2.27%
2002 1.14% 1.14% 1.48% 1.64% 1.18% 1.07% 1.46% 1.80% 1.51% 2.03% 2.20% 2.38% 1.59%
2001 3.73% 3.53% 2.92% 3.27% 3.62% 3.25% 2.72% 2.72% 2.65% 2.13% 1.90% 1.55% 2.83%
2000 2.74% 3.22% 3.76% 3.07% 3.19% 3.73% 3.66% 3.41% 3.45% 3.45% 3.45% 3.39% 3.38%
 Current Inflation Rate

Home » India Business

The Current Oil, Inflation & Rupee Scenario

Submitted by Aditya Rao on September 11, 2008 - 10:33am.
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The movement of oil prices in the world markets has

brought about the setting in of some important changes. Free
markets like the United States or the Socialist ones like India
have had to accept the fact that the very structure of the
world economy is changing. We once viewed the 100 dollars per
barrel of oil as an indication to push the panic button but after
everything that has happened in the past one year there is an
inclination to believe that this figure despite being regarded as
‘high’ is still a ‘realistic’ expression of the oil scenario.
We have witnessed that the price of oil has been slowly coming down but not
before the governments of the world interfered in some way. For starters, they
realized that there were two ways to deal with the problem. Firstly to use the
OPEC meetings as a means to persuade oil producers to produce more oil in an
effort to match supply with demand for oil.
The second way was to strictly monitor the oil markets to make sure that the
speculation over the price of oil does not set in hence leading to inconsistent
buying and selling frenzies. These two primary steps have brought down the level
of oil to where it is today.
But it has made amply clear that the World is consuming a lot more oil than
even a year ago and that this is a long term situation that needs to be
immediately dealt with.
For India the cooling of oil prices has helped the rate of inflation to slightly
decrease. Today’s inflation figures show that the figures have fallen for the
third week in a row. It is however premature to say that the grip of inflation
has melted away. India is still dealing with double digit inflation and is battling
a crisis with the rising prices of commodities. Some food items cost less but
there are still many that cost way more than before.
It is however a positive step for India to have been able to bring inflation down
to this week’s level of 12.1%.Much of this has been also due to the tight credit
policy wielded by the RBI in addition to the fall in crude prices. Interest rate
hikes by the RBI have tightened the supply of credit in the market and while
the RBI still mulls over another interest rate hike, there is still a lot of work to
be done on this front.
The RBI has however been very liberal with the falling
Rupee. Even though the RBI is responsible in making sure
that it didn’t fall past the 45.05 mark which is a two year high as
of today’s closing against the Dollar, the fact does remain
that the market expected them to do a lot more to curtail
the rate and strengthen it. The RBI has maintained that the
falling Rupee is a short term trend wherein people are
buying more Dollars and that this will not last once the
situation stabilizes.
So while the Indian economy cheers the marginal fall in inflation and the
moderation in oil prices, the falling Rupee is definitely a concern.

Current Inflation: Deconstructing the Underlying Social

Factors
Thursday 29 May 2008, by Arun Kumar

Introduction: Why Unanticipated?

Inflation is suddenly big international news. Till the other day, in the Economic Survey in
February end and the RBI quarterly report in January, there was no indication that we were
facing an impending sharp rise in the rate of inflation. “Overall inflation is likely to remain
moderate in coming months, as the policy measures taken during the course of the year work
their way through the system.” (Economic Survey, 2007-08, para 4.65, p. 84)) “These measures
have supplemented the various pre-emptive monetary measures undertaken by the Reserve Bank
since mid-2004 and helped in containing inflationary expectations.” (RBI Macroeconomic and
Monetary Developments: Third Quarter Review, January 29, 2008, p.56)

Is this surprising, given that important functionaries in the government act like salespersons
constantly praising their products and hiding its flaws? The FM giving a spin was happy to note
that the inflation rate is stable at 7.5 per cent. The PM, on return from Bhutan, admitted that
inflation is a problem but advised his countrymen to have patience and hope for a good monsoon.
Is that the assurance the country needed? The credibility of senior functionaries is being eroded
and that dilutes the policy- making powers. The PM, FM, Chairperson of the Advisory Council to
the PM, etc. have said that inflation would soon be brought under check but the public seems
unconvinced, even if that actually turns out to be true in, say, six months time. The rate of
inflation coming down means prices still rise but less fast. It is like a bus that is reducing its speed
(decelerating) but still moving ahead.

So, lowering of the inflation rate means prices still rise and do not fall. The government has taken
a slew of steps to control inflation but these seem to have had little impact as yet. These relate to
export duties to reduce exports of foodgrains, lower import duties to bring down domestic prices,
curbs on forward trading, announcement of expected bumper harvest and increase in
procurement. All these are expected to slow down inflationary expectations.

Blame is sought to be put on external factors like the worldwide food shortage and the rise in
energy prices globally. Indeed, international prices of food and petro-products have risen rapidly
in the last few years and more specifically in the last one year. Why has all this become apparent
to policy-makers only in the last two months when the inflation rate suddenly went up? Why
could this not have been anticipated given the international trends? Is our leadership so short-
sighted that it cannot foresee what is about to happen a few months from now? If that is the truth,
how can the public trust the prediction that the steps now taken will succeed in curbing the rising
inflation? There is a clear contradiction. Perceptions about Inflation

IT is argued that the rate of inflation in India is not high compared to, say, what it is in other
countries, like, Zimbabwe, China, Russia or South Africa. Several things need to be understood as
to why at even low levels of inflation, political tempers begin to rise in India. First, since a
substantial number of people live in extreme poverty (below the poverty line) in the country and
these people have no indexation for inflation or any kind of social security, they face a crisis in
their lives even with a moderate increase in prices, especially when these happen to be food
prices. In 2004-05, they spent more than 65 per cent of their monthly bill on food. Even this was
inadequate to give them adequate calories; so any further squeeze in this becomes unbearable.

Secondly, not only the extremely poor but those who are just poor, live at less than Rs 20 per
capita per day, and constitute 77 per cent of the population (according to the Unorganised
Commission Report), find any rise in food prices hurtful (they spend more than 60 per cent of
their budget on food). In a consumerist society where demonstration effect is strong, many
amongst these aspire to buy goods other than the most basic. They cut their basic requirements to
do so. However, when essential goods prices rise, they see their aspirations evaporating and their
dissatisfaction rises—they have already cut their essential goods consumption to the bone and
cannot cut it any further.

Thirdly, the farmers would benefit from the food price increase. However, usually they are not the
ones getting the major share of the increased price of food because only the well-off amongst
them have the holding power. Many of them are indebted and have committed to supply their
crop at given prices to the local traders and lenders. It is often noticed that the price received by
the farmer for the produce at the farm or even in the mandi may be a fraction of what it sells for in
the urban consuming centres. Then, of course, there are the large numbers of marginal farmers
who go to the market to buy a large chunk of their requirements. Unambiguously, only the rich
farmers benefit from the food price rise. For the rest in agriculture, there is a gradation of loss.

Fourthly, the middle classes, aspiring to consume beyond their not inconsiderable means, feel
aggrieved. The upwardly mobile are in debt so that as prices rise, they need to borrow more and
are squeezed by larger installments of payments, and hence feel unhappy.

Services Sector Not Included in Inflation Figures

FIFTHLY, and critically, the government announced inflation rate does not represent the true
effect of the price rise. As discussed in the Alternative Economic Survey, 2006-07, the Services
sector is grossly under- represented in the various measures of inflation—wholesale or consumer
price indices. The well-off sections are consuming more and more of services and their prices are
rising fast (like, for education and health or tourism) or new services are being added to the
consumption bundle (like, internet and mobile phones) leaving less for spending on what was
previously being consumed. Thus, family budgets are under greater strain causing dissatisfaction
even among the well-off.

Imagine, there was a time, when there were no malls to go to and do impulsive buying. There
were no credit cards that allow one to buy even if one’s pockets are empty. Earlier there were no
Baristas or Café Coffee Day to go and spend Rs 30 or more on a coffee. A tea in a dhaba at Rs 3
was the cup that cheered. One went to an IIM at Rs 4000 per annum and not the current Rs 5
lakhs per annum at IIM-A. A hotel room at Rs 1000 per night has gone up to Rs 5000 per night. A
visit to a movie by the kids has risen steeply by five times. Earlier a smaller per cent of the
population had asthma or cancer or diabetes or blood pressure and, worse, the treatment for all
these has become hugely expensive with the ongoing privatisation of health care. Earlier in a
middle class home there was one land line, now there are perhaps an additional two-to-three cell
phones with family members so that bills have mounted even if the unit cost of the call has come
down. Electricity rates are much higher and so are bus and auto fares. None of this gets counted
in the inflation index. Thus, family budgets are being eroded much more than what the
government’s inflation implies.

Finally, it is the businessman and the corrupt who are benefiting the most from the inflation.
Money from the pocket of the buyer goes into the cash box of the seller. Their collective profits
and incomes have been shooting up in the last six years as shown in the Alternative Economic
Survey of 2007. These sections are able to splurge even more than earlier and that is creating
further demonstration effect and disquiet. To the middle class family whose child has not been
able to join the corporate sector or if it is not in a position to generate some illegal income,
something appears to be desperately wrong—others are marching ahead while they are struggling
to retain their position in the pecking order. Global Factors

GLOBALLY, crude petroleum prices have risen ($ 126 per gallon compared to $ 50 last year) and
affect us since we import 70 per cent of our requirement. The short-sightedness of our policy-
makers who have been propagating energy intensive development is apparent. It was hoped that
the rise of the rupee in relation to the dollar would help lower the inflation rate. But with energy
prices rising even faster, this effect has not been visible. It has only moderated some of the
possible price rise.

Global food shortages are affecting international prices of foodstuff. Our net imports are three per
cent of our consumption of food but since we are much more integrated into the world
foodmarkets due to the WTO regime, we are also affected. Wheat, rice and oilseeds prices have
gone up sharply. Diversion of land to produce bio-fuels is one of the causes of growing shortage.
In the USA, corn used to produce fuel now accounts for 20 per cent of the grain production.
Further, in China, land is being diverted from food production to urbanisation and
industrialisation. Drought in Australia has reduced production there. In India agricultural land is
getting diverted to SEZs and other mega projects. Global stocks have fallen to about half in the
last few years and this is signalling the developing crisis in the food economy. According to the
UN, three billion people are food insecure now and 18,000 children die of malnourishment daily.
A large percentage of these are from India.

George Bush’s Take

WE have allowed our food security to be dented by going in for more of cash crops or by letting
investments in agriculture stagnate and decline so that we are not able to produce foodgrains
faster than the increase in population. Consequently, our per capita food production has fallen
after 1991. But the rich are consuming more indirectly through increased intake of meat and
poultry, thus leaving less for the poor. One unit of meat requires up to six units of food and one
unit of poultry requires two units of food. Since the nineties, the current policy- makers have
argued that food production is not critical since we can import if we have foreign exchange
reserves. The chickens have come to roost—we have more than $ 300 billion of reserves but are
struggling with rising food insecurity.

George Bush spoke a partial truth that India’s (and China’s) rising prosperity (in per capita
income terms) is putting pressure on global food prices. As pointed out earlier, our net imports
are not much higher; it is the global supplies that are the problem. Further our per capita
consumption of cereals and pulses has dropped between 1991 and 2005 from 510 grams per day
to 440 grams per day because the poor are not even able to afford what they could earlier. (This
trend was anticipated as early as 1994 in the Alternative Budget.)

The rising consumption by the well-off is being over-compensated by the decline of the
consumption of the poor. No wonder, malnourishment amongst children and women is so high. If
we are eating less on the average and importing roughly the same as earlier, how can India be one
of the causes of the rising food prices? What George Bush fails to see is the enormous waste of
food in the USA where obesity is a problem and where only 30 per cent of the food consumed is
absorbed by the body.

Another important cause of the rise in food prices is the moderation in the subsidies that used to
be given to food products. This is not only a result of the WTO related pressures but under the
New Economic Policies after 1991, to reduce the fiscal deficit, subsidies were required to be
curtailed. Further, under these policies, the PDS was expected to be scaled down. This was an
important instrument of release of food into the market to keep prices in check. Thus, even if the
poor did not get food from the PDS, they benefited from the moderation of prices in the market.
The successful running of the PDS did require subsidies for moderation of prices and as subsidies
have been curtailed, their role has declined.

With elections approaching, businessmen have become emboldened to raise prices. They feel they
can get away with speculation, hoarding, cartel formation, etc. If there is a small shortage,
speculation makes the shortage greater. Suppliers hold back supplies to make a profit later and
those wanting to purchase, try to buy more than they need currently so that they can hope to save
on costs. Thus, the supply-demand gap widens and prices shoot up more than necessary. Futures
trading by making more money available to speculators aggravates shortages. Similarly, the entry
of corporates (Indian and foreign) with deep pockets in the foodmarkets also leads to aggravation
of speculative activity and adversely affects prices. Anticipating price rise, they would buy more
and increase the shortage. Steps by the Government

IN the case of cement and steel, the government has pressed the cartels to bring down prices but
this may prove to be temporary. It is the recent request/intervention of the PM that got some
action from the cartels but this is unlikely to last long. For instance, right after the Union Budget,
even though excise duties on steel were reduced in the hope that prices would be lowered, steel
manufacturers raised the prices rather than lowering them or holding the price line. There are
many such cartels (like, the IIMs) in the economy.

The government could do a lot more but acts reluctantly given its market oriented philosophy. For
instance, it could act against hoarders and force them to dehoard the stocks but the steps taken
appear to be lukewarm at best. This reluctance leads to delays and the situation tends to slip out
of control.

The PM has said he is against drastic steps and the public should be patient—wait for steps to
have their effect and for a good monsoon. He has clearly expressed his preference for business
whose growth is more important than the suffering of the people due to the inflation. Could he
not have done the opposite, request business to have patience and lower its huge margins on the
basis of which it has produced the second largest number of billionairs in the world in one of the
poorest countries? That would have benefited the public by lowering the rate of inflation. Did the
PM pick up anything from the Bhutaneese people’s unique experiment with the human happiness
index? After all, people matter more than anything else.

Conclusion

A viable and active PDS system is a good check to successful hoarding and evening out shortages
amongst the population but, as noted earlier, this has been run down deliberately and little is
being done to revive it. The government’s recent announcements that the food crop is a record
one and that procurement is much larger will help lower inflationary expectations but that maybe
temporary. Further, while there are international reasons for the high rate of inflation, there are
strong internal ones also that are entrenched in the development path we are currently pursuing.
Small instabilities and gaps in supply and demand quickly become big ones given the global
influences. Globalisation needs to be revisited. The government needs to remove its pro-corporate
blinkers and face the reality that its policies are leading to higher inflation and social discontent.

(Enlarged version of an article published in The Tribune)

Dr Arun Kumar is a Professor, Centre for Economic Studies and Planning, School of Social
Sciences, Jawaharlal Nehru University, New Delhi. He can be contacted at e-mail:
arunkumar1000@hotmail.com