Inflation at sub-zero levels may have diverted public attention from rising prices of daily use items, but the Economic Survey sounds alarm bells on the widening gap between wholesale price index-based inflation and consumer price inflation. There are undertones in the survey leading to fears of inflation rate climbing again at a fast pace in the coming days.

For the current year though, chief economic advisor and the survey’s principal author Arvind Virmani estimates WPI inflation to remain low and, at best, rise to between 2 per cent and 4 per cent by the last week of March 2010. Food price inflation and the impact of increasing global crude oil prices can, however, change the outlook, he told The Indian Express. Global oil prices have jumped from less than $40 a barrel in December last year to over $70 now, he points out.

The increasing difference between WPI and CPI calls for serious action to correct distortions. “It (the widening gap) suggests that the supply chain is unable to cope with accelerating growth in income and consumer demand. This points to the urgency of reforming the land market and real estate sector, retailing, public transport and food supply chain, with a view to promoting modernisation and competition,” the survey states.

The survey also cites the effectiveness of the Centre’s rural development programmes as a reason for high income levels and strong consumer demand in the rural sector, which pushed up the consumer price index for agricultural and rural labour as well as food inflation despite strong agricultural growth.

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