{"id":2477,"date":"2013-12-16T15:41:12","date_gmt":"2013-12-16T10:11:12","guid":{"rendered":"http:\/\/teekhapan.wordpress.com\/?p=2477"},"modified":"2013-12-16T15:41:12","modified_gmt":"2013-12-16T10:11:12","slug":"explained-what-the-two-sides-of-inflation-tell-us-about-the-economy","status":"publish","type":"post","link":"https:\/\/vivekkaul.com\/2013\/12\/16\/explained-what-the-two-sides-of-inflation-tell-us-about-the-economy\/","title":{"rendered":"Explained: What the two sides of inflation tell us about the economy"},"content":{"rendered":"

\"Inflation\"<\/a>
\nVivek Kaul <\/span><\/span><\/span>
\n\u201cSo there is yet another inflation piece that I need to write,\u201d he said, in a rather disappointed tone.
\n\u201cOh, but didn’t you just write one a few days back,\u201d she replied. \u201cAnd I was so looking forward to spending the afternoon at Phoenix Mills.\u201d
\n\u201cAh. Safes me the trouble,\u201d he said. \u201cAnd for once I don’t have to eat that fancy, expensive and bland pasta in white sauce, that you make me eat.\u201d
\n\u201cBut how come you need to write something on inflation so soon?\u201d she asked ignoring the pasta jibe. \u201cDidn’t you write one on Friday?<\/a>\u201d
\n\u201cYes I did. But that was a piece around consumer price inflation (CPI). Today the wholesale price inflation number has come out.\u201d
\n\u201cOh,\u201d she said. \u201cAnd how bad is it?\u201d
\n\u201cThe wholesale price inflation(WPI) number for November 2013 came in at 7.52%. In comparison the number was at 7% in October 2013. Interestingly, the WPI number for September 2013 was revised to 7.05%, from the earlier 6.46%.\u201d
\n\u201cAnd what does that tell us?\u201d
\n\u201cWhat that tells us is that the WPI numbers after September are also likely to be revised upwards,\u201dhe said.
\n\u201cHmmm. So inflation might be more than what we are being told right now?\u201d
\n\u201cYes. Also, the food inflation was at 19.93%. Within it, onion prices rose by 190.3% and vegetable prices rose by 95.3$. Interestingly, the onion prices have fallen by 5.1% between October and November 2013. But potato prices have risen by 30.8% in the same period.\u201d
\n\u201cYeah. I bought both onions and potatoes recently and realised that.\u201d
\n\u201cBut food inflation at nearly 20% is what is making the scenario difficult for most people. Half of the expenditure of an average Indian household in India is on food. In case of the poor it is 60%. Over the last few years the government has gone on a spending spree in rural India, in the hope of tackling poverty. It has led to wages in rural India going up by 15% per year, over the last five years.\u201d
\n\u201cBut isn’t that good?\u201d
\n\u201cWell, not in an environment where food prices are going up by 20%. You must remember that half of the expenditure of an average Indian family is on food.\u201d
\n\u201cAnd that is having other economic repercussions?\u201d she asked.
\n\u201cYes. When people spend significantly more money on food, they are likely to cut down on other expenditure. And this also reflects in inflation data.\u201d
\n\u201cHow?\u201d
\n\u201cManufactured products form a little under 65% of the wholesale price inflation index. The inflation in case of manufactured products stands at 2.64%. So inflation is primarily being driven by food articles. The other big contributors to inflation have been cooking gas and diesel, which have risen by 10.9% and 15.7% respectively.\u201d
\n\u201cOh, is that really the case. I did not know that,\u201d she replied. \u201cBut why are the prices of manufactured products not going up as fast as of the food articles and fuel?\u201d
\n\u201cI think I have already explained that to you.\u201d
\n\u201cReally?\u201d
\n\u201cYes. When people are spending more and more money on buying food. They are likely to be left with less money to buy everything else. In this scenario they are likely to cut down on other expenditure.\u201d
\n\u201cOther expenditure?\u201d
\n\u201cIt could be anything. From buying consumer durables to cars to everything without which one can do without in the immediate future.\u201d
\n\u201cAnd this has an impact on businesses?\u201d she asked.
\n\u201cYes. When the demand is not going up, businesses are not in a position to increase prices. And that is reflected in the manufacturing products inflation of just 2.64%. It was at <\/span><\/span><\/span>5.41% in November 2012.<\/span><\/span><\/span>\u201d
\n<\/b><\/span><\/span><\/span>\u201cInteresting.\u201d
\n\u201cYes, what this really means is that business growth is slowing down and this in turn will be reflected in slow economic growth as well.\u201d
\n\u201cHmmm. Thanks for explaining this to me.\u201d
\n\u201cMy pleasure.\u201d
\n\u201cSo why don’t you finish writing this and then we will go increase the other expenditure.\u201d
\n\u201cYou mean pasta in white sauce?\u201d he asked.
\n\u201cYes. Remember we are doing this for the nation.\u201d
\nThe article originally appeared on www.firstpost.com<\/a> on December 16, 2013 <\/span><\/span><\/span>
\n(Vivek Kaul is a writer. He tweets @kaul_vivek)<\/b><\/i><\/span><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Vivek Kaul \u201cSo there is yet another inflation piece that I need to write,\u201d he said, in a rather disappointed tone. \u201cOh, but didn’t you just write one a few days back,\u201d she replied. \u201cAnd I was so looking forward to spending the afternoon at Phoenix Mills.\u201d \u201cAh. Safes me the trouble,\u201d he said. \u201cAnd … <\/p>\n

Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"qubely_global_settings":"","qubely_interactions":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2,33],"tags":[825,4013],"qubely_featured_image_url":null,"qubely_author":{"display_name":"Vivek Kaul","author_link":"https:\/\/vivekkaul.com\/author\/vivekkaul\/"},"qubely_comment":0,"qubely_category":"Analysis<\/a> Firstpost<\/a>","qubely_excerpt":"Vivek Kaul \u201cSo there is yet another inflation piece that I need to write,\u201d he said, in a rather disappointed tone. \u201cOh, but didn’t you just write one a few days back,\u201d she replied. \u201cAnd I was so looking forward to spending the afternoon at Phoenix Mills.\u201d \u201cAh. Safes me the trouble,\u201d he said. \u201cAnd…","jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts\/2477"}],"collection":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/comments?post=2477"}],"version-history":[{"count":0,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts\/2477\/revisions"}],"wp:attachment":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/media?parent=2477"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/categories?post=2477"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/tags?post=2477"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}