New Delhi, Oct. 19 -- Discussions on inflation in India centre around causes that lead to an increase in prices of specific commodities such as food or crude oil. Even Consumer Price Index (CPI) data is issued with food inflation marked apart from headline inflation.

Of late, regulators and analysts have been talking about inflation excluding precious metals. While this is useful, it does not constitute an explanation of the behaviour of the general price level. It is true that an increase in crude prices may lead to a cost-push rise in the prices of several commodities, but the overall increase in the general price level cannot be explained by these factors.

Take the situation of a household. Suppose food prices increase; given the fix...