New Delhi, 18 June (IANS). A report on Wednesday by Crisil suggested that the way food and fuel category are excluded from the main inflation index, similarly gold can also be excluded while assessing the actual impact of domestic demand at prices. Especially when gold prices begin to rise during the period of high global economic uncertainty.
The report found that gold inflation contributed to 17 percent increase in main inflation in the 12 months ended May 2025, despite the 2.3 percent stake compared to other items in the main inflation index.
The report argued, “During the financial year 2025, gold inflation increased to an average of 24.7 percent in FY 2024 against 15.1 percent, while other categories broke the trend and recorded a joint inflation rate of only 2.4 percent.
Between May 2024 and May 2025, the core CPI inflation rose 111 BPS to 4.2 percent. While the prices in most sub-categories within core inflation declined, but the five sub-categories reversed the trend and recorded an increase in inflation, including mobile tariffs, travel and transports, toiletics, silver and gold. Of these, the fastest growth in gold inflation was observed. Global prices bounced as global economic uncertainty promoted the demand for safe investment for metal worldwide.
Crisil’s report states, “Although the gold headline CPI (1.1 percent of the total index) is underweight, including it in the core CPI calculation distorted domestic value signs, especially at the time of global economic uncertainty.”
The increase in core inflation is generally considered a sign of domestic demand pressure at prices. However, gold prices are largely affected by global factors, so they do not necessarily reflect the trend of domestic consumption.
In uncertain global times such as current, gold prices can affect the outlook of the main inflation and should be excluded from analysis.
According to the report, for example, if gold prices followed their normal trend, the main inflation in May would have been 3.4 percent rather than 4.2 percent report. Keeping the gold out suggests that the main CPI increased only 65 basis points (BPS) in the 12 months ending May 2025, while the main measures commonly used increased by 111 BPS.
Major central banks also include gold in their main inflation index, but its load is much lower than in India, which limits its impact on their main inflation measurement.
-IANS
SKT/
