Question

Given the following data:

$\begin{array}{ccccc}\text{Year}& \text{CPI Industrial worker}& \text{CPI of Urban Non- Manual Employees}& \text{CPI agricultural}& \text{WPI (1993-94=100 )}\\ 1995-96& 313& 257& 234& 121.6\\ 1996-97& 342& 283& 256& 127.2\\ 1997-98& 336& 302& 264& 132.8\\ 1998-99& 414& 337& 293& 140.7\\ 1999-00& 428& 352& 306& 145.3\\ 1995-96& 444& 252& 234& 155.7\\ 2000-02& 463& 390& 309& 161.3\\ 2002-03& 482& 405& 319& 166.8\\ 2003-04& 500& 420& 331& 175.9\end{array}$
Source Economic Survey, Government of India 2004 - 2005
(i) Calculate the inflation rates using different index numbers.
(ii) Comment on the relative values of the index numbers.
(iii) Are they comparable?

Answer 1

(i) (a) Inflation using CPI of Industrial workers

$\begin{array}{ccc}\text{Year}& \text{CPI of Industrial Workers (1982=100)}& \text{Inflation Rate (in \%) =}\frac{A_2-A_1}{A_1}\times 100\\ 1995-96& 313& \frac{313-100}{100}\times =213\\ 1996-97& 342& \frac{342-100}{100}\times =242\\ 1997-98& 366& \frac{366-100}{100}\times =266\\ 1998-99& 414& \frac{414-100}{100}\times =314\\ 1999-00& 428& \frac{428-100}{100}\times =328\\ 2000-01& 444& \frac{444-100}{100}\times =344\\ 2001-02& 463& \frac{463-100}{100}\times =363\\ 2002-03& 482& \frac{482-100}{100}\times =382\\ 2003-04& 500& \frac{500-100}{100}\times =400\end{array}$

(b) Inflation using CPI of Non-Manual Employees

$\begin{array}{ccc}\text{Year}& \text{CPI of Industrial Workers (1982=100)}& \text{Inflation Rate (in \%) =}\frac{A_2-A_1}{A_1}\times 100\\ 1995-96& 257& \frac{257-100}{100}\times =157\\ 1996-97& 283& \frac{283-100}{100}\times =183\\ 1997-98& 302& \frac{302-100}{100}\times =202\\ 1998-99& 337& \frac{337-100}{100}\times =237\\ 1999-00& 352& \frac{352-100}{100}\times =252\\ 2000-01& 350& \frac{350-100}{100}\times =250\\ 2001-02& 390& \frac{390-100}{100}\times =290\\ 2002-03& 405& \frac{405-100}{100}\times =305\\ 2003-04& 420& \frac{420-100}{100}\times =320\end{array}$

(c) Inflation using CPI of Agricultural Labourers

$\begin{array}{ccc}\text{Year}& \text{CPI of Industrial Workers (1982=100)}& \text{Inflation Rate (in \%) =}\frac{A_2-A_1}{A_1}\times 100\\ 1995-96& 234& \frac{234-100}{100}\times =134\\ 1996-97& 256& \frac{256-100}{100}\times =156\\ 1997-98& 264& \frac{264-100}{100}\times =164\\ 1998-99& 293& \frac{293-100}{100}\times =193\\ 1999-00& 306& \frac{306-100}{100}\times =206\\ 2000-01& 306& \frac{306-100}{100}\times =206\\ 2001-02& 309& \frac{309-100}{100}\times =209\\ 2002-03& 319& \frac{319-100}{100}\times =219\\ 2003-04& 331& \frac{331-100}{100}\times =231\end{array}$

(d) Inflation using WPI

$\begin{array}{ccc}\text{Year}& \text{CPI of Industrial Workers (1982=100)}& \text{Inflation Rate (in \%) =}\frac{A_2-A_1}{A_1}\times 100\\ 1995-96& 121.6& \frac{121.6-100}{100}\times =21.6\\ 1996-97& 127.2& \frac{127.2-100}{100}\times =27.2\\ 1997-98& 132.8& \frac{132.8-100}{100}\times =32.8\\ 1998-99& 140.7& \frac{140.7-100}{100}\times =40.7\\ 1999-00& 145.3& \frac{145.3-100}{100}\times =45.3\\ 2000-01& 155.7& \frac{155.7-100}{100}\times =55.7\\ 2001-02& 161.3& \frac{161.3-100}{100}\times =61.3\\ 2002-03& 166.8& \frac{166.8-100}{100}\times =66.8\\ 2003-04& 175.9& \frac{175.9-100}{100}\times =75.9\end{array}$

(ii) The inflation rate calculated using CPI industrial worker with the base year 1982 is the highest and inflation rate calculated using WPI with the base year 1993-94 is the least.
(iii) No the index number are not comparable because of the following reasons:
(a) Base periods for CPI of industrial workers, urban non-manual workers, agricultural labourers and WPI are different.
(b) Commodities and their weightage in different index number may be different.