Ask any businessman and he will tell you that what happens in the economy is important to his business. Yet, in the world of business journalism, where most journalists are busy finding out who did what to whom in the corporate world, economic issues are infra dig. Neither reporters nor editors bother enough about the quality of reporting of the economy.

A case in point is a report in Business Times, the business section of The Times of India, of 4 August 2003. Its shocking title: 'Inflation touches 4.59 per cent, cost of living up 1.5 times'.

We thought the report was talking of the cost of living rising over many years. Surprise! The report says the cost of living was "up 1.5 times" in just one year - the last one! Anybody with the least amount of knowledge of economics, or real life, will realise there's something wrong with the conclusion. Especially when they see the rates of inflation reported.

The rate of inflation, on a year-on-year basis, is given as 4.59 per cent in the last week reported, compared with 4.65 per cent in the previous week and 2.86 per cent a year earlier. What the writer has done, and the editors have allowed, is calculate the difference between last year's rate of inflation and the current rate as a percentage, and announce that this percentage is the increase in the cost of living. And even while doing this, the writer has made an arithmetical mistake, showing an increase of 50 per cent instead of 60 per cent. Who cares about considerations like getting the arithmetic right?

And, to compound the errors, the writer has made an error in English, saying "cost of living up 1.5 times", which clearly means the cost of living has risen by 1.5 times, or risen to a level of 2.5 times what it was earlier. What was probably actually meant was the cost of living has risen to 1.5 times the previous level.

The writer and editors failed to understand that the rate of inflation and the cost of living are not the same thing. If you equate the cost of living more or less with the price line, best described by the index of wholesale (or retail) prices, then the rate of inflation is merely the increase in this index, not the index itself.

The cost of fish
If that is difficult to understand, try this. Let's say, last year we paid Rs.102 for a kilo of fish, against Rs.100 a year before that. If we were to extrapolate our cost of living purely from the price of fish, then it rose 2 per cent last year. Today, a year later, a kilo of the same fish costs Rs.105, or about 3 per cent more than it did a year ago. So the rate of increase in the cost of living has gone up 50 per cent from last year; but the cost of living has gone up only by 3 per cent from last year!

We hope people have not taken the TOI report seriously. If they did, they would be in panic now. A 150 per cent increase in the cost of living in a year is very, very steep. It means the inflation rate is 150 per cent. It means India has got into a severe crisis, a la Latin America. The implications would be many. A few examples:

	Stock up on food, clothing and other necessities for at least six months, if not more, because their prices will be doubling and trebling soon.
	In order to this, borrow as much as you can from banks - they are lending at less than 15 per cent, and for personal loans for housing at as low rates as around 10 per cent.
	Stock up on your manufacturing inputs now; their prices will shoot up steeply later.
	Buy euros and dollars (even if the dollar is a bit weak now), because such a high rate of inflation in India implies that the rupee will have to come crashing down.
	Foreign investors should exit India in droves since the real value of their investments and returns is nose-diving
	And so on.