The CPI Inflation Numbers And The Feel-good Factor

"There are three kinds of lies: lies, damned lies, and statistics."

While the origin of the quote is debated, what it says is true. To a large extent at least.

Let us take the example of the recent news on consumer price index numbers (CPI) which made the headlines.

April CPI inflation hit an 11-month low at 4.83 per cent, screamed the newspapers, and all was good with the world. But was it actually?

There was of course a lot of speculation on whether this meant that the RBI will cut rates now or not. Once one delved deeper one would know that RBI will not cut rates anytime soon, perhaps not this year, but eventually it would. People who are paying off home loans would give a sigh and realise that their home loan rates would not go down in the near future.

But the question remains- what does the news mean to the common man?

While CPI inflation was up 4.83 per cent, prices of vegetables and pulses were up 28 per cent and 17 per cent from over a year ago. That definitely hurts the common man. And prices of many other essentials have also gone up at a much higher rate than the inflation numbers.

For example, medical inflation in India is about 15 per cent and according to a recent report it was revealed that health insurance premiums have shot up by 25 per cent last year for 52 per cent policyholders. Factoring all this data in, the 'real' inflation for us would be much higher than the CPI figure and that is what we should be concerned about.

While such numbers are important, what you should and can do is to have a very meticulous budget in place. List down all your expenses, however small they might be, either in a notepad, or an excel sheet, or use one of the several expense tracker apps you will find. The good thing with these apps is that they track your SMSs and put a certain spending under the appropriate category. So when you buy a pizza, the cost is added to the food and beverage category by default.

Once you track your budget every month, you know exactly where your money is going. Then you know whether you are spending more in some category than you had intended to spend on. This will help you make adjustments the next time. Also, listing down your expenses is a good way to think twice before you make an impulsive purchase.

Finally, by doing so, you get to know what the actual inflation is and how it is affecting the surplus you have or what you can save and what you should do if you are falling short. Let the CPI numbers you read in the papers be nothing more than of academic interest. 

Anagh Pal

BW Reporters