Inflation was being overstated considering the lower consumption on food: NITI Aayog CEO

Consumption impacting GDP and Inflation: With the findings of the Household Consumption Expenditure Survey released on Saturday, there will be implications for the consumer price index (CPI), as it will need to be rebalanced to represent the current consumption patterns, BVR Subrahmanyam, CEO of the NITI Aayog said on Sunday. 

“This means, the contribution of food to CPI inflation will be lower and probably was lower in earlier years also. This means inflation was being overstated and is probably less as food has been the major contributor to inflation,” Subrahmanyan added.  The divergence in WPI and CPI has been phenomenal in the past few months. 

As per the findings of the survey, the consumption of cereals and food as a share of total consumption has gone down both in rural and urban India. The cereal consumption as a share of total consumption has gone down from 22 per cent in 1999-2000 to 10.7 per cent in 2011-2012, to less than 5 per cent in rural India, and cereal consumption as a share has gone down from 12 per cent in 1999-2000 to 6 per cent in 2011-2012, to less than 4 per cent now in rural India.  This simply means that consumption patterns have changed in the last 11 years as shown by the survey. 

According to Subrahmanyam, the latest survey findings will also have an impact on GDP calculations. “This will have implications on GDP and deflators as well," he added.