India Using "flawed methodology" to Calculate Inflation?

[Bushroda]

So is that system reaching the poor? is it just in paper or pratically done? Why its just followed in South Indian states only, why not rest of India? Or is it just a political stunt to get vote?

Public Distribution Scheme is implemented allover India. Rice is a staple diet in South Indian states & therefore it is being made available so cheaply in those states. Wheat, Maize & pulses are mostly consumed in North & Central Indian states & likewise those grains are cheap there. Rs. 2/kg only sounds astonishing otherwise there isn't too much of difference from the regulated price available in the ration shop. I think its Rs.3.25/kg otherwise. It is in a way a political stunt. So, if the price of rice is decreased to Rs.2/kg the price of pulses or other grains is silently increased to cover-up the cost. This would benefit some but not the others.

If that is properly done poverty can be eliminated frm India completly right?

Subsidy is a double edged sword. It cuts both ways. Most of the farm sector miseries in India is due to some mindless subsidies. If given a chance GoI wouldn't blink an eye to get rid of some farm sector subsidies. Because of the food subsidy, farmers do not get fair enough rate for their produce. Government inorder to minimize the subsidy burden tries to buy the products at bare minimum price. Their argument is simple that the farmers have already been provided with free electricity, water & seeds for cultivation & therefore there is no reason for them to hike the price. Because of this farmers are unable adopt new irrigation techniques to enrich crop yield. This inturn leads to shortage of food supply. This is what leads to unending cycle of poverty. The current farm sector growth in India is barely above the population growth rate. Subsidy business in India runs to nearly $50 billion (both direct & indirect) a year. This money could be used for social development.

 

[Neo]

Can we conclude that actual inflation is higher than official figures published my the Government?

What about poverty rate?

 

[Bushroda]

Can we conclude that actual inflation is higher than official figures published my the Government?

What about poverty rate?

Not necessarily.. I've already explained how the GoI monitors the supply. So, there shouldn't be any extreme discrepancy in figures. As for poverty rates, Poverty everywhere is calculated on the basis of Calorie+Basic needs based approach. Calorie based takes into account the daily intake of 2300 calories and basic-needs approach looks for minimum expenditure needed for clothing, health, education. If a person's basic income is sufficient to fulfil the above criteria then he isn't considered poor. Now, when the government itself provides the needs to fulfil the requirement then how can the poverty rates differ?

 

[Vinod2070]

As for poverty rates, Poverty everywhere is calculated on the basis of Calorie+Basic needs based approach. Calorie based takes into account the daily intake of 2300 calories and basic-needs approach looks for minimum expenditure needed for clothing, health, education.

Bushroda, I am not sure of the highlighted part. In India (and Pakistan too? and may be many parts of the developing world) it may be true but I know there are "poor" people in USA who have 3 cars in the family! So most likely they are better off than most "middle-class" Indians.

I think the USA designates the lowest income group in the country as poor but I am not sure how it is done.