Deflationary trends in India?

India’s crazy economics news reporting keeps getting crazier.  WPI data released yesterday showed a negative number leading papers to say deflation in India.  This is really poor reporting by all means.

This is at best called as disinflation which means rate of rise in prices has declined or become negative for some time. It could be due to base effect or sudden decline in certain component like oil prices. Deflation is an extreme form where both economic activity and prices are declining. There is nothing of this sort happening. Ask a common an and he/she would still be worried over inflation. And then with recent GDP number release, we can even take out the slowdown word from the debates.

There should be caution using certain economic terms. And this is really basic stuff. I can’t even blame media who may not have studied economics formally. Have seen certain reports written by economic analysts who have used the “d” word for this trend..

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4 Responses to “Deflationary trends in India?”

  1. vipul vivek (@LazyCalcuttan) Says:

    It was after some discussion that the newspaper settled on “deflation”, given the fall in WPI. But yes, we’re no economists. So another report based on a CRISIL research in the paper today kept the rating agency’s headline, which says “disinflationary”. But could you throw some light for us on how to gauge whether or no it’s deflation. If the WPI falling is only a necessary condition, what all constitute the sufficient condition?
    http://www.business-standard.com/article/economy-policy/disinflationary-trends-continue-115021700037_1.html

  2. Amol Agrawal Says:

    deflation is a much more than just fall in WPI inflation..as we see in Japan and may be in Europe, both inflation and economic conditions are highly weak..so you see both low gdp growth and falling inflation every month…

    and you see all indices falling…but we dont see any of this in cpi…it is just wpi…we saw very similar movements in 2009 as well when WPI was in -ve and CPI (old series then) was +ve..

  3. vipul vivek (@LazyCalcuttan) Says:

    So for how long should we see decline in all economic indicators to call it deflation?

  4. Amol Agrawal Says:

    There is no really time thing here..it took a while for econs to dub Japan is suffering from deflation. Even in Eurozone, they waited for a few releases to call it deflation..

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