Price Indices and Inflation Rates

With inflation shooting up, it is an appropriate time to critically discuss the quality of India's inflation statistics. This article first discusses the official wholesale and consumer price indices and the impact of not regularly incorporating new products and changes in quality, and related deficiencies. It also draws on an official United States commission report that studied the implications of productivity changes for measuring inflation. The paper concludes with suggestions for revising the procedures for collecting and compiling price information and also recommends preparation of a new producer price index to replace the official Wholesale Price Index and, in addition to the consumer price indices, the compilation of an annual cost of living index.