Our most esteemed Finance Minister said in the US recently that India can live with an inflation rate of 6-6.5%. Really? Easy for a politician to say because they buy everything on taxpayer money but slow death for us consumers. Inflation in India is calculated on the wholesale price index or WPI while in other countries it is based of the consumer price index or CPI which adds all the taxes and is a true reflection of daily life. However there is another big lie hidden in these figures. We are always told the year-on-year, y-o-y, inflation rate which means the rate compared to last year's prices when, in fact, inflation compounds annually and we should be told the 5 and 10 year average as well as the y-o-y figure. Let us take something that costs Rs 100. Add tax at 20% and the cost to the customer is Rs 120. If inflation stays at 6% then the same thing will cost Rs 133.82 after 5 years and not Rs 130. Now add tax at 20% and the buying cost has jumped to Rs 160.58 which is an increase of Rs 40.58. This means the average rate of inflation for the customer over 5 years was 8.11%, much higher than the comfort level of our esteemed Finance Minister. If the rate of inflation remains at 10%, as at present, then the average over 5 years will be a punishing 14.85%. This is why developed countries strive to keep inflation rates at between 2-3% and act aggressively to bring it down at the earliest sign of it going above 3%. That is also why China has been so concerned about inflation above 5%. Inflation in India can be controlled only by reducing property prices by 70%. But that is where the black money is. Hence 6% is good. Protects the thieves.