LOK SABHA SECRETARIAT

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MEMBERS’ REFERENCE SERVICE

REFERENCE NOTE . No. 6/RN/Ref./2013

For the use of Members of Parliament Not for Publication

Price Rise/Inflation

--------------------------------------------------------------------------------------------------------------------- The reference material is for personal use of the Members in the discharge of their Parliamentary duties, and is not for publication. This Service is not to be quoted as the source of the information as it is based on the sources indicated at the end/in the text. This Service does not accept any responsibility for the accuracy or veracity of the information or views contained in the note/collection.

Content

Page No.

1. Introduction 1

2. Factors for Rising Prices 2

3. Effects of Price Rise 2

4. How is Price Rise Measured? 2

5. Inflationary Experience of India

- Inflation in the Pre-reform Period (1951-52 to 1991-92) 4

- Inflation in the Post-reform Period (since 1992-93) 5

- Average Trends in Inflation 2000-2001 to 2010-2011 6

- Inflation in 20012-13 9

6. Inflation Experience of India in Comparison to World 10

7. Episodes of High Inflation in India 1971 to 2012 11

8. Government Measures to Contain Inflation 11

9. Annexures 14

Price Rise/Inflation

Introduction The prices of commodities fluctuate, responding to the pulls and pushes of demand

and supply. A failure of a particular crop or trend for a certain kind of clothing can cause the

price of that crop and the cost of that kind of clothing to rise, just as an unexpected surplus in

the production of onions will cause the price of onions to fall.

Inflation, on the other hand, has little to do with these changes in relative prices of

goods and services1. It refers, instead, to a significant rise in the general price level in a

country over a long period of time. It is the opposite of price stability. In economics, price

stability is not used in a rigid sense to mean price fixity. A modest increase of 2 to 3 per cent

per annum in the price level is a compatible, sometimes even desirable, in the context of

economic development. However, when the general price rise appreciates (say in double-

digit figure) and experienced over a long period of time, it gets the dreaded name inflation2.

For the common person, there is something threatening about the phenomenon of inflation,

especially on those occasions when the rise in prices of goods is not matched by an

equivalent increase in the prices of labour3.

Then what should be the tolerable limit of price rise. There is no clear- cut answer to

this question because it all depends upon the economic circumstances prevailing in a country

at a particular time. The Indian Committee to Review the Working of the Monetary System

(S. Chakravarty Committee) recommended, as a general guideline, an increase in price of

not more than 4 per cent4. Rangarajan regarded 6 per cent of inflation to be the outer limit.

Tarapore Committee recommended 3 per cent level of inflation rate. Thus the acceptable

range of inflation rate in India lies between 3-7 per cent5.

1 Occasional Paper by Kaushik Basu “Understanding Inflation and Controlling it.” – 5 August, 2011

http://finmin.nic.in/WorkingPaper/understanding 2 Indian Economy – A Performance Reivew, 1947-48 to 2010-11 by C.S. Prasad, 2010, p. 87

3 Occasional Paper by Kaushik Basu, op.cit.

4 Indian Economy – A Performance Review, op.cit., p. 88

5 Inflationary Trends in India by Aparna Bhardwaj and Rajesh Kumar, 2011, pp. xvi-xvii

-2-

Factors for rising prices

In general, the following factors are attributed to rise in prices:

Area and production, which is dependent on weather and technology.

Minimum Support Price

Government policies

Substitute product

Demand/consumption

Seasonal Cycles

International prices6 Effects of Price Rise

The distortionary effects of inflation are injurious to the smooth functioning of an

economy:-

1. Rising prices adversely affect the economic conditions of fixed-income groups, particularly wage earners. When prices are high, the value of money is low and vice versa. There is always a lag between price rise and money wage adjustment. Poor people in the unorganised sector are hit the worst because their income are not linked with price index. However, business firms gain during price rise because the money value of goods in their stock rises continually.

2. Inflation encourages hoarding of essential commodities, leading to speculation and generation of black money.

3. Fluctuating prices generate opposite effects on debtors and creditors. Rising prices prove beneficial for debtors at the expense of creditors. Thus, inflation discourages people to invest in financial assets. Conversely, falling prices make it difficult for debtors to meet their obligations7.

Price stability is a prime concern of the governments the world over.

How is price rise measured

Changes in the level of prices are measured by means of index numbers. The index

of prices includes a wide variety of goods and services which are essential for life8. In India

6 India (15

th Lok Sabha ), 6

th Report of Standing Committee on Finance 2009-2010, Laid on 17.12.2009

7 Indian Economy – A Performance Review, op.cit, pp. 89-90

8 Ibid, p. 88

-3-

there are five indices for measuring changes in the price level. Four of these are the

Consumer Price Indices (CPIs), which are specific to a group, or class of consumers and

the one Wholesale Price Index (WPI), which has an economy wide coverage and a higher

frequency (Annexure I and II).

The current series of WPI at base 2004-05 constitutes 676 commodities. There are

three consumer price indices (CPIs) traditionally released at the national level to reflect the

fluctuations in retail prices of goods and services pertaining to specific segments of

population in the country. The basket of CPI for Industrial Workers (CPI-IW) based on

2001 included 120-360 items, CPI for Agriculture Labourers (CPI-AL) and CPI for Rural

Labourers (CPI-RL) both with base year 1986-87 included 260 items. In addition, there is

now the new series of CPI-(U+R) based on the year 2010 for both rural and urban areas and

also combined has been introduced from January 2011 and includes 456 items9.

Year-on-Year inflation based on WPI and CPIs (per cent)

Source: India, Ministry of Finance, Monthly Economic Report, December 2012 (http://finmin.nic.in/stats_data/monthly_economic_report/2012/inddec12.pdf)

9 Lok Sabha Starred Question No. 347 dated 26.08.2011

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According to the International Monetary Fund (IMF) statistics, 24 countries use WPI as

the official measure to track inflation, whereas 157 countries use CPI for the same purpose.

WPI is considered as most preferred measure of inflation in India due to its wider

coverage, scope and frequency. WPI is compiled and released by Department of Industrial

Policy and Promotion on monthly basis and weekly basis for primary articles10.

Inflationary Experience of India Inflation in the Pre-reform Period (1951-52 to 1991-92): In the pre-reform period, inflation

had accelerated during the 1960s partly induced by the two wars in 1962 and 1965 and the

crop failure of 1965-66 when agricultural production fell by more than 16 per cent. It became

a matter of serious concern when it breached 20 per cent in the early 1970s led by a setback

in agricultural production and an unprecedented hike in international oil prices. Prior to that,

the 1950s witnessed average inflation of less than 2 per cent, but with considerable variation

in yearly inflation. The percentage change in prices varied from a negative value of 12.8 per

cent in 1952-53 to the highest inflation of 13.8 per cent in 1956-57. The deflation of 1952-53

is mainly attributed to the higher agricultural production in that year, whereas high inflation of

1956-57 was mainly due to demand pressures, particularly investment demand in the light of

the thrust on industrialization in the second five-year plan. During the 1950s, two more years

viz, 1954-55 (-6.71 per cent) and 1955-56 (-5.23 per cent) also witnessed negative price

changes. Thus, notwithstanding low average inflation during 1950s, there was considerable

volatility in the price movement. However, inflation was in the range of 3 to 7 per cent during

the last four years of this decade (1957-58 to 1960-61) (Annexure I).

In the following decade, average inflation increased to 6.2 per cent. Price changes

were the lowest at a negative of 0.91 per cent in 1968-69 as a result of bumper agricultural

production in the previous year. It was highest at 13.95 per cent in 1966-67, followed by

inflation of 11.56 per cent in the following year. High inflation during these two years can

largely be attributed to impact of the Pakistan war in 1965 and the famine experienced during

10

Rajya Sabha Starred Question No. 25 dated 2.08.2011

-5-

1965-66. During this decade, average inflation was higher vis-à-vis the previous decade, but

the variation subsided11.

The decade of the 1970s stands out as the most turbulent period in India in terms of

inflationary uncertainty, witnessing very high inflation mainly driven by the supply shocks

emanating from agricultural and oil prices. Independent India’s highest inflation occurred in

September 1974 when it reached 33.3%. Country’s worst inflationary episode was from

November 1973 to December 1974 when inflation never dropped below 20% and was above

30% for four consecutive months starting June 1974 (Annexure III). Referring to the severity

in inflation, particularly that of agricultural commodities in 1972-73 and 1973-74, the RBI

Annual Report 1974-75 observed that “even the seasonal decline in prices, particularly

agricultural commodity prices, to which the Indian economy is traditionally

accustomed, did not take place during the last two years”. A hike in oil prices and poor

agricultural production led to reappearance of high inflation in 1979-80 (17.1 per cent) and

1980-81 (18.2 per cent).

Inflation averaged 7.2 per cent per annum during the 1980s with a noteworthy

reduction in inflation variability. Inflation varied between 4.4 per cent in 1985-86 and 10.1 per

cent in 1990-9112.

Though on an average, inflation based on the WPI remained below the 7 percent level

through the 1950s and 1960s, it accelerated during the first half of the 1970s to touch double

digit figures but decelerated in the second half of 1970s as also through the 1980s13.

Inflation in the Post-reform Period (since 1992-93: Between end-March 1991 and end-

March 1992, the Indian rupee depreciated by nearly 37 per cent with respect to the US dollar.

Notwithstanding the limited openness of the Indian economy, this order of depreciation added

to inflationary pressures during the first half of the 1990s [RBI 2004]. Hikes in procurement

prices as well as supply demand imbalances in essential commodities like pulses, oilseeds

and edibles oils further added to inflation. Lower foreign exchange reserves in the early

1990s constrained the import option for meeting the demand gaps. The sustained rise in fuel

11

Indian Experience of Inflation: A Review of the Evolving Process – R.K. Patnaik and Amaresh Samantaraya, Economic and Political Weekly dated 28 January 2006, pp. 349-357 12

Ibid 13

Ministry of Finance, Economic Survey 2001-2002

-6-

prices at a double-digit rate (of about 13 per cent) in the first half of the 1990s had its impact

on inflation, not only directly but also through the second round effects. Furthermore, a

phased opening up of the Indian economy also added to inflationary pressures. Due to the

combined effect of all these factors, a sharp increase in inflation was witnessed during the

period 1992-9614. Four out of first five years of the 1990s registered double digit inflation.

From 1995-96 onwards, there has been a continuous deceleration and the average inflation

for the period 1996-97 to 2000-01 was the lowest since the mid 1950s in terms of the 52

week average15.

WPI Inflation in India: Periodic Averages (Per cent)

Period Average Inflation Range

1951-52 to 1955-56 -2.75 -12.78 to 6.51

1956- 57 to 1960-61 6.3 3.03 to 13.79

1961-62 to 1965-66 5.8 0.0 to 11.1

1966-67 to1970-71 6.7 -0.91 to 13.95

1971-72 to 1975-76 12.0 -1.1 to 25.2

1976-77 to 1980-81 8 .5 0.0 to 18.2

1981-82 to 1985-86 6.5 4.4 to 9.3

1986-87 to 1990-91 7.8 5.8 to 10.3

1991-92 to 1995-96 10.6 8.1 to 13.7

1996-97 to 2000-01 5.0 3.3 to 7.2

Source: (i) Economic Survey 2001-2002 (ii) Indian Experience of Inflation: A Review of the Evolving Process, EPW, January 2006

Average trends in inflation (2000-01 to 2011-12) The range of inflation varied from a low of 3.3 per cent in 1999-2000 to a high of 7.2

per cent in 2000-01. During this period, inflation has had a distinct decelerating trend. In fact,

14

Indian Experience of Inflation, op.cit., pp. 349-357 15

op.cit., Economic Survey 2001-02

-7-

even in 2002-03 when the country faced a severe drought, inflation remained moderate at 3.4

per cent. Moreover, 2002-03 was also marked by the simultaneous impact of several others

adverse developments such as border tensions and high international crude oil prices16.

A hardening of international oil prices as well as domestic food prices responding to a

deficient monsoon in the previous year fuelled a spurt in inflation in India during the first half

of 2004-05. Inflation began to ease in the second half of 2004-05 under the impact of a

combination of fiscal and monetary measures and weakening of south-west monsoon17. In

2005-06, WPI inflation eased to 4.3 per cent as compared to 6.5 per cent a year earlier18.

The ten-year average of headline WPI inflation was around 5.4 per cent from 2000-01

to 2009-10.In this decade 2000-01, 2003-04, 2004-05, 2006- 07, and 2008-09 had higher

inflation relative to the decadal average. The ten-year average inflation in fuel was around 8.9

per cent. The major portion of that was contributed by the high inflation of 2000-01. The

years 2003-04, 2004-05, 2006-07, and 2008-09 also witnessed high inflation in manufactured

products mainly on account of high prices of raw materials such as basic metal alloys and

metal products, nonmetallic mineral products, and machinery and machine tools. The year

2008-09 was different from the previous three years as inflation in all the three sectors

remained high on account of high international fuel and commodity prices. The year 2009-

10 was an abnormal one due to global slowdown and unfavourable monsoon.

Notwithstanding, the average inflation was 3.6 per cent backed by negative inflation in fuel19.

The year 2010-11 was marked by strong inflation exhibiting persistence on the back of

elevated inflation expectations, hike in vegetable prices with unseasonal rains post-monsoon

and rising global commodity prices that resulted in significant cost-push and demand-pull

pressures since December 2010. Drivers of inflation changed during 2010-11.Food products

were the main drivers of price rise during April-July 2010, accounting for about two-fifths of

increase in WPI. Their share declined during August- November, when non-food primary

products turned out to be the main drivers. However, these price pressures spilled over to

manufactured non-food products during December 2010-March 2011, which accounted for 61

16

Indian Experience of Inflation, op.cit., pp. 349-357 17

Ibid 18

op.cit., Economic Survey 2010-11 19

Ibid

-8-

per cent of the price rise in this period20. The whole of 2010-11 was marked by inflation

persisting with headline inflation averaging 9.6 per cent.

During 2011-12, the WPI exhibited a sustained increase, even though the pace of

increase somewhat slowed down during the latter half of the year. The financial year stared

with a headline inflation of 9.7 per cent which briefly touched double digit in September 2011

before coming down to 6.6 per cent in January 201221. The increase in the WPI during the

initial months of the year was driven by a host of factors that included an increase in food

prices, a revision in the administered prices of fuel as well as an increase in manufactured

product prices in the wake of significant pressure from high input costs as well as strong

demand and pricing power. The decline in growth during 2011-12 was expected to ease the

pressure on core inflation. However, the extent of moderation was constrained by further

pressure from rupee depreciation and high global commodity prices.

The phase of softening of inflation was marked by a decline in the contribution of food,

which again increased from February 2012 as prices increased sharply after the seasonal

decline. The contribution of non-food manufactured products remained strong despite the

deceleration in growth momentum. The contribution of fuel group to overall inflation remained

high and significant throughout the year despite suppressed inflation from the administered

prices of some petro-products, coal and electricity.

Primary food articles inflation declined sharply during November 2011–January 2012,

from above 10 per cent to negative territory, largely reflecting a seasonal decline in the prices

of vegetables and a favourable base effect. However, prices rebounded significantly

subsequently, resulting in food inflation reverting to double-digit levels by April 2012. The

prices of protein-based food articles have remained persistently high since October 201122.

As per mid-year analysis 2012-13, inflation as measured by WPI averaged 8.9 per cent for

2011-12.

20

RBI, Annual Report 2010-11, p.2 21

op.cit., Economic Survey 2011-12 22

RBI Annual Report 2011-12 (http://rbidocs.rbi.org.in/rdocs/AnnualReport/PDFs/01ANR230812FL.pdf)

-9-

Annual Average Inflation Rate based on WPI

(Per cent)

Year Primary Articles

Fuel and Power

Manufactured Products

All Commodities

Weights (%) 20.12 14.91 64.97 100

2000-01 2.8 28.5 3.3 7.2

2001-02 3.6 8.9 1.8 3.6

2002-03 3.3 5.5 2.6 3.4

2003-04 4.3 6.4 5.7 5.5

2004-05 3.7 10.1 6.3 6.5

1st 5 Years Average 3.5 11.9 3.9 5.2

2005-06 4.3 13.5 2.3 4.3

2006-07 9.6 6.5 5.6 6.5

2007-08 8.3 0.0 4.9 4.8

2008-09 11.0 11.6 6.2 8.0

2009-10 12.7 -2.1 1.8 3.6

2nd 5 Years Average 9.2 5.9 4.1 5.5*

Average 2000-2001 to 2009-10 (10 years)

6.4 8.9 4.1 5.4

2010-11 17.7 12.3 5.7 9.6

2011-12 9.8 14.0 7.3 8.9$

* Source: Economic Survey 2010-2011 $RBI Annual Report 2011-12, Appendix Table 1

Inflation in 2012-13: The inflation decelerated to 7.7 per cent in first half of (April-September)

of 2012-13. WPI inflation was 8.07 per cent in September 2012, which was 8.01 per cent in

August 2012. It has fallen to 7.32 per cent in October 2012, 7.24 per cent in November, 7.18

per cent December 201223 and stood at 6.62 (provisional) for the month of January 201324.

23

India, Ministry of Finance, Mid-Year Economic, Analysis, 2012-13 24

PIB Release of Ministry of Commerce and Industry dated 14.1.2013 and 14.2.2013

-10-

Inflationary Experience of India in Comparison to World

India is a moderate inflation country. For example, in the 62 years since 1950-51

average annual inflation rate as measured by changes in the wholesale price index (WPI)

increased at a rate of 6.7 per cent per annum. That is not a very high rate considering that

many countries, both developed and developing, experienced very high inflation in their

modern development history. In fact, more recently in the 1980s and 1990s, the world

inflation averaged around 17 per cent per annum.

In the 2000s, there was a sharp all round moderation in global inflation. In the eight

year period from 2000 to 2007, the world inflation averaged 3.9 per cent per annum. Even the

emerging and developing economies (EDEs) which traditionally had very high inflation

showed an average annual inflation at 6.7 per cent. India’s inflation performance was even

better at 5.2 per cent as measured by WPI and 4.6 per cent measured by the consumer price

index (CPI-IW). In 2008 the global financial crisis struck following which inflation rose sharply

both in advanced countries and EDEs as commodity and oil prices rebounded. Thereafter,

inflation rate moderated both in advanced economies and EDEs. In India too the inflation rate

rose from 4.7 per cent in 2007-08 to 8.1 per cent in 2008-09 and fell to 3.8 per cent in 2009-

10 (See Table). However, the inflation rate backed up and stayed near double digits during

2010-11 and 2011-12 before showing some moderation in 2012-13.

Table: In recent years India’s inflation rate has been higher than world average

(year-on-year in per cent)

-11-

The high inflation during 2010 and 2011 was a combination of both adverse global and

domestic factors as well as supply and demand factors25.

Episodes of High Inflation in India: 1971 to 2012

Since 1970s, there have been seven episodes of high and persistent inflation in India

where the headline WPI inflation was above 8 per cent for more than six months on a

sustained basis (See Table). Most of these episodes resulted in high inflation persisting for

about 2-3 years. Even though these high inflation periods had different drivers like oil shocks,

drought and currency devaluation, persistence of inflation seems to be a common pattern

when inflation turns high.

Source: RBI Annual Report, 2011-12

It may be noted that all three major drivers of inflation, viz., food, fuel and core have

been significantly contributing to the high and persistent inflation26.

Government Measures to Contain Inflation Inflation has been a major cause of concern for both the Government and Reserve

Bank of India who are taking a number of measures to contain it.

25

Indian Inflation Puzzle (Acceptance Speech by Deepak Mohanty, Executive Director, Reserve Bank of India, in the function of Late Dr. Ramchandra Parnerkar Outstanding Economics Award 2013 at Mumbai on January 31, 2013) (http://www.rbi.org.in/scripts/BS_SpeechesView.aspx?Id=776) 26

op.cit., RBI, Annual Report, pp.32-33

-12-

Fiscal & Administrative measures

Reduced import duties to zero - for wheat, onion, pulses, crude palmolein and to 7.5 per cent for refined & hydrogenated oils & vegetable oils.

Duty-free import of white and raw sugar was extended up to 30.6.2012; however, import duty of 10 per cent was instituted in June 2012.

Banned export of edible oils (except coconut oil and forest based oil) and edible oils in blended consumer packs upto 5 kg with a capacity of 20,000 tons per annum and pulses (except Kabuli chana and organic pulses and lentils up to a maximum of 10000 tonnes per annum).

Imposed stock limits from time to time in the case of select essential commodities such as pulses, edible oil, and edible oilseeds and in the case of paddy and rice for specific seven states upto 30.11.2012.

Ban on export of onion was imposed for short period of time whenever required. Exports of Onion were calibrated through the mechanism of Minimum Export Prices (MEP).

Maintained the Central Issue Price (CIP) for rice (at Rs 5.65 per kg for BPL and Rs 3 per kg for AAY) and wheat (at Rs 4.15 per kg for BPL and Rs 2 per kg for AAY) since 2002.

Suspended Futures trading in rice, urad, tur, guar gum and guar seed.

To ensure adequate availability of sugar for the households covered under TPDS, the levy obligation on sugar factories was restored to 10 per cent for sugar season 2011-12.

Government allocated rice and wheat under Open Market Sales Scheme.

Resumed the scheme for subsidized imported pulses through PDS in a varied form with the nomenclature " Scheme for Supply of Imported Pulses at Subsidized rates to States/UTs for Distribution under PDS to BPL card holders" with a subsidy element of Rs. 20/- per kg to be paid to the designated importing agencies upto a maximum number of BPL card holders for the residual part of the current year and extended the scheme for subsidized imported edible oils w.e.f. 1.10.2012 to 30.9.2013 with subsidy of Rs. 15/- per kg for import of upto 10 Lakh tonnes of edible oils for this period27.

27

India, Ministry of Finance, Mid-Year Economic Review, 2012-13

-13-

Budgetary and other measures

A number of measures were announced in Union Budget 2012-13 to augment supply

and improve storage and warehousing facilities. Government launched a National Mission for

Protein supplements in 2011-12 with allocation of Rs 300 crore. To broaden the scope of

production of fish to coastal aquaculture, apart from fresh water aquaculture, the outlay in

2012-13 was stepped up to Rs 500 crore. Recently, Government permitted Foreign Direct

Investment (FDI) in multi-brand retail trading. This will help consumers and farmers as it will

improve the selling and purchasing facilities.

Monetary measures

The Reserve Bank of India (RBI) had also taken suitable steps to contain inflation with

13 consecutive increases by 375 bps in policy rates from March 2010 to October 201128.

We all know that sustained level of high inflation is bad for the economy as it imposes

real costs which are borne disproportionately by the different segment of the economy. A low

rate of inflation along with high growth is the ideal situation. The fight against inflation is a part

of agenda of Government at the present hour.

28

Ibid

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Annexure-I

Wholesale Price Inflation (Average) - 1953-54 to 2011-12 (upto March 2012)

(Per cent) Year All

Commodity Primary Articles

of which Fuel, Power,

Light and Lubricants

Manufactured Products

Food Articles

Non-food

Articles

1 2 3 4 5 6 7

(Base : 1952-53 = 100)

1953-54 4.6 . 6.7 . -0.8 -1.0 1954-55 -6.8 . -11.3 . -2.1 1.6 1955-56 -5.2 . -8.5 . -2.0 -0.9 1956-57 14.0 . 18.1 . 9.5 6.6 1957-58 2.9 . 4.1 . 8.8 1.7 1958-59 4.1 . 8.2 . 1.8 0.3 1959-60 3.8 . 3.3 . 1.0 3.0 1960-61 6.6 . 0.8 . 3.0 10.9 1961-62 0.2 . 0.1 . 1.7 2.2

(Base : 1961-62 = 100)

1962-63 3.8 . 6.5 . 3.2 3.1 1963-64 6.2 . 8.4 . 14.4 2.5 1964-65 11.0 . 17.3 . 1.9 3.9 1965-66 7.6 . 6.8 . 3.2 7.7 1966-67 13.9 . 18.3 . 8.4 8.0 1967-68 11.6 . 21.4 . 5.6 3.2 1968-69 -1.1 . -5.2 . 4.6 2.3 1969-70 3.7 . -0.1 . 4.4 6.0 1970-71 5.5 . 3.6 . 4.3 7.9

(Base : 1970-71 = 100)

1971-72 5.6 0.9 1.1 -1.4 5.9 9.5 1972-73 10.0 9.7 10.1 9.0 4.0 11.3 1973-74 20.2 28.1 22.7 36.4 18.6 14.4 1974-75 25.2 25.2 26.0 11.7 51.8 21.0 1975-76 -1.1 -6.6 -4.9 -14.6 10.5 1.4 1976-77 2.1 0.8 -5.1 19.7 5.3 2.3 1977-78 5.2 9.9 11.8 6.3 1.5 2.3 1978-79 0.0 -1.3 -0.7 -4.3 4.4 0.2 1979-80 17.1 13.8 8.2 14.2 15.7 20.2 1980-81 18.2 15.0 11.4 11.9 25.2 19.2 1981-82 9.3 11.3 13.1 10.5 20.7 5.2

(Base : 1981-82 = 100)

1982-83 4.9 6.7 11.1 0.8 6.5 3.5 1983-84 7.5 10.8 13.9 11.5 5.6 6.1 1984-85 6.5 6.2 4.2 10.9 4.3 7.0 1985-86 4.4 0.2 1.7 -3.4 10.7 6.0 1986-87 5.8 9.1 10.2 11.4 6.8 3.8 1987-88 8.1 11.3 9.0 21.6 3.4 7.2

-15-

1 2 3 4 5 6 7

1988-89 7.5 4.9 9.9 -1.7 5.5 9.4 1989-90 7.5 2.2 1.2 3.6 3.6 11.3 1990-91 10.3 13.0 11.9 17.0 12.3 8.4 1991-92 13.7 18.1 20.2 18.0 13.2 11.3 1992-93 10.1 7.5 12.4 -0.2 14.1 10.9 1993-94 8.4 6.9 4.9 8.9 15.5 7.8

(Base : 1993-94 = 100)

1994-95 12.6 15.8 12.8 24.2 8.9 12.3 1995-96 8.0 8.2 8.3 9.0 5.1 8.5 1996-97 4.6 8.4 12.4 -0.9 10.4 2.1 1997-98 4.4 2.7 3.0 2.5 13.8 2.9 1998-99 5.9 12.1 12.7 10.4 3.3 4.4 1999-00 3.3 1.2 3.8 -5.8 9.1 2.7 2000-01 7.2 2.8 3.0 2.4 28.5 3.3 2001-02 3.6 3.6 3.3 4.4 8.9 1.8 2002-03 3.4 3.3 1.8 8.2 5.5 2.6 2003-04 5.5 4.3 1.3 12.6 6.4 5.7 2004-05 6.5 3.6 2.6 0.7 10.1 6.3

(Base : 2004-05 = 100)

2005-06 4.4 4.3 5.4 -3.3 13.5 2.4 2006-07 6.6 9.6 9.6 5.8 6.5 5.7 2007-08 4.7 8.3 7.0 11.9 0.0 4.8 2008-09 8.1 11.0 9.1 12.9 11.6 6.2 2009-10 3.8 12.7 15.3 5.5 -2.1 2.2 2010-11 9.6 17.7 15.6 22.3 12.3 5.7 2011-12 8.9 9.8 7.3 9.6 14.0 7.3

Note : 1. Major groups/sub-groups under the various series are not strictly comparable on account of

changes in classification of commodities over time. 2. In the series (Base: 1961-62=100), MP comprises sub-groups chemicals, machinery and transport

equipment and manufactures. 3. Also see Notes on Tables.

Source: (i) RBI, Handbook of Statistics on Indian Economy 2011- 2012 – http://rbidocs.rbi.org.in/rdocs/publication/PDFS/232 (ii) RBI, Handbook of Monetary Statistics of India 2006 - http://rbidocs.rbi.org.in/rdocs/publication/PDFS/690

-16-

Annexure-II Consumer Price Inflation (Average) - 1970-71 to 2011-12 (upto March 2012)

(Per cent)

Year Industrial Workers

Urban Non-manual Employees

Agricultural Labourers

1 2 3 4

(Base : 1960 = 100) 1970-71 5.1 4.2 2.1 1971-72 3.2 3.4 1.0 1972-73 7.8 6.7 10.7 1973-74 20.8 15.1 21.2 1974-75 26.8 22.2 34.6 1975-76 -1.3 2.6 -4.0 1976-77 -3.8 0.0 -13.8 1977-78 7.6 6.9 10.6 1978-79 2.2 3.4 -2.2 1979-80 8.8 7.8 9.1 1980-81 11.4 11.8 14.2 1981-82 12.5 11.9 12.4 1982-83 7.8 8.0 5.2 1983-84 12.6 10.3 11.3

(Base : 1982 = 100 for IW) (Base : 1984-85 = 100 for UNME)

1984-85 6.3 8.7 0.2 1985-86 6.8 7.0 4.8 1986-87 8.7 7.5 4.8 1987-88 8.8 9.6 10.0 1988-89 9.4 7.9 12.6 1989-90 6.1 6.6 5.4 1990-91 11.6 11.0 7.6 1991-92 13.5 13.7 19.3 1992-93 9.6 10.4 12.3 1993-94 7.5 6.9 3.5 1994-95 10.1 9.7 11.9 1995-96 10.2 9.3 10.7

(Base : 1986-87 = 100 for AL) 1996-97 9.4 9.3 9.1 1997-98 6.8 6.9 3.4 1998-99 13.1 11.3 11.0 1999-00 3.4 4.5 4.4 2000-01 3.8 5.6 -0.3 2001-02 4.3 5.1 1.1 2002-03 4.0 3.8 3.2 2003-04 3.9 3.7 3.9 2004-05 3.8 3.6 2.6 2005-06 4.4 4.7 3.9 2006-07 6.7 6.6 7.8

(Base : 2001 = 100 for IW) 2007-08 6.2 5.9 7.5 2008-09 9.1 8.9 10.2 2009-10 12.4 13.0 13.9 2010-11 10.4 - 10.0 2011-12 8.4 - 8.2

Source: Handbook of Statistics on Indian Economy, 2011-12

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Annexure III

Inflation Data for WPI and Food Prices from 1972-73 onwards

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Source: Occasional Paper by Kaushik Basu “Understanding Inflation and Controlling it.” – 5 August, 2011 http://finmin.nic.in/WorkingPaper/understanding

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All Commodity Combined Food

Mar-11 9.68 6.78

Apr-11 9.74 8.95

May-11 9.56 8.11

Jun-11 9.51 8.04

Jul-11 9.36 8.17

Aug-11 9.78 9.19

Sep-11 10.00 9.06

Oct-11 9.87 9.29

Nov-11 9.46 7.94

Dec-11 7.74 2.70

Jan-12 7.23 1.45

Feb-12 7.56 5.93

Mar-12 7.69 8.70

Apr-12 7.50 9.31

May-12 7.55 8.93

Jun-12 7.58 9.03

Jul-12 7.52 8.72

Aug-12 8.01

Sep-12 8.07

Oct-12 7.32

Nov-12 7.24

Dec-12 7.18

Jan-13 6.62

Source: Office of Economic Advisor, Ministry of Finance and Industry, Government of India, Rajya Sabha Unstarred Question No. 1582 dated 27.8.2012