New Delhi, Sep 14 (IANS) India cannot be “unique” and release the wholesale price index (WPI) – which reflects the rate of inflation – on a weekly basis, says a noted economist with the government.
“We cannot be unique in data generation. There must be some reason why 90 percent or more countries release this data on a monthly basis,” said Arvind Virmani, chief economic adviser in the finance ministry, in an interview to IANS.
Virmani said the government should quickly move to monthly release of WPI data, a globally accepted practice. Most important economies such as the US or the UK have monthly inflation data.
“The issue of base period is completely non-controversial in the sense that everybody agrees that the base for any index should be periodically revised,” Virmani said.
“The Department of Industrial Policy and Promotion (DIPP) has done extensive survey and has found that there are very few countries which release such data on a weekly basis,” he said.
“They (DIPP) have been suggesting that we should switch over to the monthly mode of WPI data release. I think there is lot of merit in that.”
The government is weighing options to adopt a new WPI data module by changing the base year from 1993-94 to 2004-05, and move to monthly release of price index.
“The issue is a practical one on how quickly you do it. We hope these things can be done quickly. It is only the question of doing it,” said Virmani, who earned his doctorate from Harvard University.
“The issue only is, of course, whatever data is available should continue to be made available to the ministry of finance and the Reserve Bank of India, who are the users of this data,” he added.
Sources in the Planning Commission, India’s official policy and planning wing, say a new WPI module is likely to be introduced to monitor nearly 1,200 products against the existing 435 products.
This is being done as the current WPI module is believed to be not totally reliable.
Explained Virmani: “If you want to compare the Indian WPI, the closest thing is the producer price index (PPI). Thus for the US in June-July PPI inflation was about 16 percent compared to our WPI inflation of 12.5 percent.”
“If you take the UK’s PPI for manufacturing, you find the growth rate was exactly similar to India’s WPI for manufacturing sector, something in the order of 12 to 13 percent.”
“The reason for this situation is the nature of the current inflation – the global cost-push factor that is driving inflation across the globe including the US and the UK as reflected in their PPI. This explains why in the current situation the WPI is quite misleading,” added Virmani.
Moreover, Virmani said: “excessive focus” on WPI in the short run was not warranted. “It gives you a wrong picture of overall inflation,” he said.