By Aaron Chaze
The Indian government’s Central Statistical Office (CSO) unveiled a new consumer price index that it says will measure inflation more accurately.
Stepping up: India’s mobiles get boost
The government currently uses the Wholesale Price Index (WPI) as its inflation benchmark, and the CSO publishes three consumer-price indexes for different segments of the population such as agricultural workers and industrial workers. The new index is more broadly based and covers every segment of the population. According to the new measure, inflation in India hit 8.2% in January 2011. As measured by the three older consumer price indexes, inflation was in a range from 8.0% to 9.5%.
A report by Bank of America Merrill Lynch says Indian government bonds lost 0.4% in January 2011, compared with a 0.2% loss for Chinese notes, as the Reserve Bank of India raised rates for the seventh time in a year to curb prices. Indian equity valuations have slumped by 11% since the beginning of 2011 on fears of rising inflation and the likelihood that interest rates will continue to rise and, consequentially, growth rates might fall. According to data from the Securities and Exchange Board of India, foreign equity investors had withdrawn $1.5 billion from Indian equities by mid-February.
Pressure is also mounting on the Indian rupee. The currency has slipped by 1.1% against the dollar so far in 2011 and by 1.5% against the Chinese yuan. The Indian trade deficit with China has doubled to $1.7 billion a month. The Indian rupee retreated by 6% over the past year to Rs 6.87/ CNY from the 2010 high of 6.48/ CNY as India imported goods worth $40.9 billion and exported a little over $20 billion.
Even as they shell out more money for domestic and imported goods, Indians can start spending more time online in larger numbers than ever before. Bharti Airtel, India’s largest mobile operator, launched India’a first 3G telecom services in the southern Indian states in January, and other carriers plan to introduce the services soon. In today’s smart-phone era 3G networks are critical to deliver online content to handheld devices. According to analysts, in a country where less than 1% of the population has access to broadband, the 3G telecom networks will push broadband access to 10% within a couple of years.