Is sugar an essential commodity like your daily staples of wheat, rice and pulses? Well, the sweet commodity should not be included in the list of essential commodities by the government, says a new study by consulting firm KPMG.
The study released on Monday says nearly 75 per cent of the total non-levy sugar (90 per cent) is consumed by industrial, small business and high-income household segments and therefore sugar can not be taken as a widely consumed commodity.
The KPMG study was assigned to redress the industry's complaints over the unjustly-high weightage given to sugar in the current wholesale price index series.
India uses the Wholesale Price Index to calculate and then decide the inflation rate in the economy.
WPI was first published in 1902, and was one of the more economic indicators available to policy makers until it was replaced by most developed countries by the Consumer Price Index in the 1970s.
WPI is the index that is used to measure the change in the average price level of goods traded in wholesale market. In India, a total of 435 commodities data on price level is tracked through WPI which is an indicator of movement in prices of commodities in all trade and transactions. It is also the price index which is available on a weekly basis with the shortest possible time lag only two weeks. The Indian government has taken WPI as an indicator of the rate of inflation in the economy.
But the KPMG study suggests that the government will have to radically alter the list of essential commodities included under the WPI.
The study done through a nation wide survey said that low-income households access only 25 per cent of the total free-sale sugar. Further, even for a low-income household, a 10 per cent increase in sugar price would result in less than 1 per cent increase in the monthly food expense. Also, the households consume a maximum of 2-3 kg sugar monthly.
The survey points out that small income households consume 25.7 per cent of the total production, at only 2-3 kg per month per household.
It looks if essential commodities are to be defined by how significantly a hike in retail price affects the home budget of the ordinary citizen, sugar may not figure at all compared to the rest.
The study has called for giving sugar a far lower weightage, at 2.02 per cent, going by the current basis of WPI calculation that excludes services.
India constituted the last WPI series of commodities in 1993-94; but has not updated it till now that economists argue the Index has lost relevance and can not be the barometer to calculate inflation.
