Recently, the Standing Committee on Health and Family Welfare submitted its report to the Parliament on the National Commission for Human Resource for Health Bill, 2011. The objective of the Bill is to “ensure adequate availability of human resources in the health sector in all states”. It seeks to set up the National Commission for Human Resources for Health (NCHRH), National Board for Health Education (NBHE), and the National Evaluation and Assessment Council (NEAC) in order to determine and regulate standards of health education in the country. It separates regulation of the education sector from that of professions such as law, medicine and nursing, and establishes professional councils at the national and state levels to regulate the professions. See here for PRS Bill Summary. The Standing Committee recommended that this Bill be withdrawn and a revised Bill be introduced in Parliament after consulting stakeholders. It felt that concerns of the professional councils such as the Medical Council of India and the Dental Council of India were not adequately addressed. Also, it noted that the powers and functions of the NCHRH and the National Commission on Higher Education and Research (to be established under the Higher Education and Research Bill, 2011 to regulate the higher education sector in the country) were overlapping in many areas. Finally, it also expressed concern over the acute shortage of qualified health workers in the country as well as variations among states and rural and urban areas. As per the 2001 Census, the estimated density of all health workers (qualified and unqualified) is about 20% less than the World Health Organisation’s norm of 2.5 health workers per 1000 population. See here for PRS Standing Committee Summary. Shortfall of health workers in rural areas Public health care in rural areas is provided through a multi-tier network. At the lowest level, there are sub health-centres for every population of 5,000 in the plains and 3,000 in hilly areas. The next level consists of Primary Health Centres (PHCs) for every population of 30,000 in the plains and 20,000 in the hills. Generally, each PHC caters to a cluster of Gram Panchayats. PHCs are required to have one medical officer and 14 other staff, including one Auxiliary Nurse Midwife (ANM). There are Community Health Centres (CHCs) for every population of 1,20,000 in the plains and 80,000 in hilly areas. These sub health centres, PHCs and CHCs are linked to district hospitals. As on March 2011, there are 14,8124 sub health centres, 23,887 PHCs and 4809 CHCs in the country.[i] Sub-Health Centres and Primary Health Centres
Table 1: State-wise comparison of vacancy in PHCs
Doctors at PHCs
ANM at PHCs and Sub-Centres
|State||Sanctioned post||Vacancy||% of vacancy||Sanctioned post||Vacancy||% of vacancy|
|Andaman & Nicobar Isld||40||12||30||214||0||0|
|Dadra & Nagar Haveli||6||0||NA||40||0||0|
|Daman & Diu||3||0||NA||26||0||0|
|Jammu & Kashmir||750||0||NA||2282||0||0|
|Sources: National Rural Health Mission (available here), PRS.Note: The data for all states is as of March 2011 except for some states where data is as of 2010. For doctors, these states are Bihar, UP, Mizoram and Delhi. For ANMs, these states are Odisha and Uttar Pradesh.|
Community Health Centres
Table 2: Vacancies in CHCs of medical specialists
% of vacancy
|Andaman & NicobarIsland||100||100||100||100|
|Dadra & Nagar Haveli||0||0||0||0|
|Daman & Diu||0||100||0||100|
|Jammu & Kashmir||34||34||53||63|
|Sources: National Rural Health Mission (available here), PRS.|
The Monetary Policy Committee (MPC) has decided to conduct an off-cycle meeting today to discuss the failure to meet the inflation target under Section 45ZN of the Reserve Bank of India Act, 1934. As per the Reserve Bank of India Act (RBI), 1934, MPC is required to meet at least four times each year, to discuss the macroeconomic issues in the country, and take policy decisions to address those. This is the second time MPC has conducted an off-cycle meeting in 2022-23. The meeting is scheduled in light of inflation being consistently high for nine consecutive months.
In this blog, we discuss what the inflation targeting framework is, examine retail and wholesale prices, and the divergence between them.
What is the inflation targeting framework, and what happens if inflation is persistently high?
In 2016, Parliament amended the RBI Act, 1934 to change the monetary policy, and introduce an inflation targeting framework. This framework prioritises price stability to achieve sustainable GDP growth. Price stability allows investors to confidently invest their money for productive activities, without worrying about it losing value. Price stability also maintains the purchasing power of consumers, i.e., the ability to purchase a good (or service) with a given amount of money.
As per the new framework, the central government, in consultation with RBI sets: (i) an inflation target, and (ii) an upper and lower tolerance level for retail inflation. The target has been set at 4%, with an upper tolerance limit of 6% and a lower tolerance limit of 2%. The upper and lower limits indicate that although it is desirable for inflation to be close to 4%, deviation between these limits is acceptable. The target and bands are revised every five years. In March 2021, the existing targets were carried forward.
Retail inflation has been above 6% for the past nine months, and it has been above 4% from October 2019 onwards (See Figure 1).
Figure 1: Consumer price index (year-on-year; in percentage)
Sources: Database on Indian Economy, Reserve Bank of India; PRS.
If inflation is above or below the prescribed limits for three quarters, RBI must submit a report to the central government explaining why prices have been rising (or falling) persistently, what will be done to correct that, and an estimate as to when the target will be achieved.
The MPC uses tools such as interest rates to control the level of inflation in the economy. One such rate is the policy repo rate, which is the rate at which RBI lends money to banks. An increase in the policy repo rate makes borrowing money more costly, and hence is expected to control inflation by reducing the money supply. MPC increased this rate from 4% in April 2022 to 4.4% in May 2022, to 4.9% in June 2022, to 5.4% in August 2022, and to 5.9% in September 2022.
Breaking down the Consumer Price Index and the Wholesale Price Index
Consumer Price Index (CPI) measures the general prices of goods and services such as food, clothing, and fuel over time. Retail inflation is calculated as the change in the CPI over a period of time. Goods and services such as petrol, food products, health, and education are considered for its calculation, which are assigned different weights (See Table 1). Between February 2022 and August 2022, the average annual inflation was 6.9%. The rise in prices of subcomponents of the CPI during this period is indicated in Table 2.
Table 1: Assigned weights for the calculation of CPI
Sources: MOSPI; PRS.
Table 2: Average inflation of some CPI components
Sources: Database on Indian Economy, RBI; PRS.
CPI is not the only index that measures inflation in an economy. The Wholesale Price Index (WPI) measures the wholesale prices of goods. A change in wholesale prices reflects wholesale inflation. Table 3 indicates the weights assigned to goods for calculating the WPI. Manufactured goods include metals, chemicals, food products, and textiles.
Primary articles (23%) include food articles, and crude petroleum and natural gas. Fuel and power (12%) include mineral oils, electricity, and coal. WPI has remained above 10% from April 2021 onwards. It reached an all-time high of 17% in May 2022. This was driven by the inflation in metals, kerosene and petroleum coke, fruits and vegetables, and palm oil.
Table 3:Assigned weights for the
Sources: Ministry of Commerce and Industry; PRS.
Why has WPI inflation been consistently above CPI inflation?
Movements in the WPI have an impact on the CPI. For almost a year and half, CPI inflation has remained below WPI inflation. However, as per the design of the indices, it is expected that CPI would remain above WPI, and that any increase in WPI would reflect in the CPI after a time lag. This is because retail prices include taxes (as a percentage of price), while wholesale prices do not. Additionally, some of the goods in WPI act as inputs in the goods considered in CPI. An increase in input prices would lead to higher retail prices after a time lag.
We discuss possible reasons for why CPI has remained below WPI for a year and a half.
Figure 2: Consumer Price Index and Wholesale Price Index
Sources: Database on Indian Economy, Reserve Bank of India; PRS.
Composition of indices
As indicated in Table 2 and 3, the composition of the two indices varies. For instance, prices of manufacture of basic metals, chemicals, and machinery grew at an average rate of 13% between February 2021 and September 2022. They contribute 7% to the WPI. These are input goods for producing final goods and services such as automobiles, which are included in the CPI. The rise in prices of transport vehicles, communication devices, fuel for transport, and housing (CPI components) rose by 6% during this period.
The Ministry of Finance has observed that wholesale prices did not feed into retail prices (from March 2021 onwards) as wholesalers absorbed the rising input costs and did not pass them on to retailers. In August 2022, it noted that as retail prices are rising now, the pass-through may occur.