ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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In Search of Optimal Inflation

The impact of inflation on dispersion of relative prices is examined in a cointegration framework using a data set of all seven components of the consumer price index from India. The empirical evidence indicates that the dispersion of relative price increases with an increase in deviation of inflation from a certain threshold rate in either direction but not with inflation per se, as is traditionally believed. The crucial inference that emerges from the empirical findings is the presence of a threshold inflation rate corresponding to which the dispersion of relative prices is minimised, and this threshold turns out to be 5%.

Issues in Measurement of Inflation Targeting

The current practice of measuring the inflation rate from fixed base weight index is outdated and likely to overstate inflation substantially compared to the chain weighted index used in developed countries. Similarly, the treatment of house rent allowance revisions to estimate the housing Consumer Price Index also significantly overstates the headline inflation. Economy-wide inflationary expectations also need proper measurement. Inflation-targeting framework without proper measurement of inflation rate can involve very high real costs and make the policy counterproductive.

Neither Moral Nor Policing

The police surveillance on young people in Kerala seems to have risen to new heights with active monitoring of youth lifestyles, which the police perceive to be linked to youth crime. These micro-fascisms only reveal the growing weakness of the pillars of 20th century Malayalee social disciplining. It is up to the politicised youth, however, to turn this into an opportunity for democratic transformation.

Inflation with Disinflation?

Price inflation in India as measured by the Wholesale Price Index and the Consumer Price Index has shown diverging trends. While WPI indicates a disinfl ationary situation for 16 months, CPI indicates inflation. Explaining the construction of the two indices, the trends of subgroups of both indices are presented. It is found that the different sample sizes and weightages of commodity groups of both indices and price interventions in the market explains, at least in part, this odd situation of infl ation along with disinfl ation.

Formula Does Matter

Amid the chaos around the new gross domestic product figures put out by the Central Statistics Office, profound improvements made in another prominent statistical marker--the Consumer Price Index--also compiled by the CSO, went unnoticed. The CPI series was revised to a more recent base year, 2012. This alone probably deserves commendation as base years of other national price indices have grown significantly remote. It is indeed a tectonic shift in estimation procedure and conforms to international best practice concerning CPI. Here we discuss the decision of CSO to replace the arithmetic mean with the geometric mean in the updated CPI indices by going through each of the established approaches to index number theory used to identify the appropriate formulation to calculate basic indices.

Chittaprosad (1915-78)

The birth centenary of Chittaprosad, the radical artist from Bengal, was last year. Born in 1915 at Naihati in present-day North 24 Parganas District, West Bengal, Chittaprosad settled in Chattagram, now in Bangladesh. He developed a great reverence for the heroes and heroines of the Chattagram...
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