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Finance minister Arun Jaitley on Monday blamed hoarders and the poor monsoon for the spike in wholesale price inflation to over 6% in May, inviting criticism from the Congress which said the same arguments were made by UPA ministers to explain why inflation was difficult to tame. Inflation, along with corruption, was one of the biggest planks of the recent Lok Sabha campaign, with the BJP flagging the UPA government's inability to curb price rise over the past decade.
The Modi government has said "containing food inflation will be its top-most priority."
The prime minister has said it is time for tough decisions to revive the economy, but high inflation could limit the space for some of the difficult policy choices to be made such as rationalising subsidies. With wholesale prices touching a five-month high in May and a below-normal monsoon on the cards - a 'business-as-usual' approach may not be enough to tackle the price rise monster.
"Good timely data is critical for the government to mitigate food inflation and for that, a better price monitoring system is imperative. Though some agencies like the price monitoring unit in the consumer affairs ministry monitor prices on a daily basis, it only involves 22 commodities and the data is not robust," said a senior official aware of the development.
Under the present system, nine different official agencies, including the Intelligence Bureau (IB), track price data with each using a different methodology and reporting format.
The IB tracks retail prices, as does the price monitoring cell in the consumer affairs ministry and the directorate of economics and statistics (DES) in the department of agriculture and cooperation. The consumer affairs ministry cell tracks wholesale and retail prices of 22 essential food items, spot and future prices of eight commodities traded on the exchanges, and weekly mandi prices of 20 items. The DES in the agriculture ministry collects wholesale and retail prices along with production, area coverage and weather forecast on a weekly basis. It collects prices from state marketing boards with an intent to provide advance assessments regarding demand-supply gaps to the Centre. Besides, the DES also tracks farm gate prices, which do not include transport and storage costs and publishes them at an interval of three to four years.
To capture price movements at the ground level, which citizens are concerned about, the Labour Bureau under the labour and employment ministry, generates consumer price indices for industrial workers, farm and rural labourers, separately. The Central Statistical Organisation also compiles consumer price indices for urban and rural areas with the purpose of providing a general measure of inflation encompassing all sections of the population.