The Central Government on Monday decided to shift the base year for Wholesale Price Index (WPI) based inflation from 1993-94 to 2004-05 and release the comprehensive data on a monthly basis.
However, the price movement of primary articles, including food items, and fuel will continue to be released every week, as at present.
Briefing the media here on the decisions taken by the Cabinet Committee on Economic Affairs (CCEA), Commerce Minister Anand Sharma maintained that the release of WPI inflation data on a monthly basis would project accurately the fluctuations in prices of manufactured goods and even in those items where the changes were minimal. “The new series of WPI inflation with 2004-05 as base year would be launched soon. The reason is... frequency. The response [to change in prices each week] is poor, particularly from the manufacturing sector. On [a] monthly basis, the response is bound to be better, reflecting [the] true position,” Mr. Sharma said.
At present, the rate of inflation based on the movement in WPI is measured on a weekly basis. In the existing series based on 1993-94 prices, the weight of primary articles in the WPI is 22.02 per cent while the share of manufactured products is 63.75 per cent. The balance of slightly over 14 per cent is accounted for by the fuel, power, light and lubricants category in the index.
With the changes in the base year and periodicity of release coming into force, the government will henceforth issue two sets of inflation numbers — one on a weekly basis for primary articles and fuel items and another comprehensive data on a monthly basis which will include manufactured goods.
Mr. Sharma pointed out that the government would release the new series (2004-05) of inflation data, which is based on the recommendations of a working group headed by Planning Commission Member Abhijit Sen, after November 14.
The Minister noted that the monthly release of WPI was a widely followed international practice and the change was expected to improve the quality of the WPI assessment.
Accordingly, while the collection of price data for manufactured products would have a monthly frequency, consistent with the practice of release of WPI, he said: “A WPI for primary articles and commodities in ‘Fuel, power, light and lubricants group’ would facilitate weekly monitoring of the prices of agricultural commodities and petroleum products which are sensitive in nature.”
Later, giving the rationale for the changes, Chief Statistician and Secretary (Statistics and Programme Implementation) Pronab Sen explained that the monthly data on inflation would lead to informed decisions by investors in the capital market and curb needless volatility.
“The monthly data would be much more reliable and accurate and market will be reacting to it much [more] reliably. Needless volatility in asset market would also stop,” he said.
Importance of CPI
Alongside, the monthly inflation data, Mr. Sen said, would also lead the people and market analysts to take into account the Consumer Price Index (CPI), which is often overlooked. “Now the people will look at both WPI and CPI. Earlier the CPI used to be ignored,” he said.
