Inflation data set to get a phase-lift

Monthly Release To Give Correct Measure Of Prices To Policymakers  THE main barometer of inflation in India will debut in its revamped form on November 14, providing a more accurate gauge of prices to policymakers in the government and the Reserve Bank of India.      The updated Wholesale Price Index (WPI), which be made available monthly instead of every week now, will have a wider and updated basket of products and a more recent base year.      "The monthly WPI index will take into account price changes in more commodities and the base year will be updated to 2004-05 from 1993-94. Once it is in place we will look at discontinuing the weekly release of data. But data on primary and fuel items would still be released on weekly basis," commerce and industry minister Anand Sharma said on Monday.      The new WPI will take into account price movements in more than 850 articles as against 435 commodities in the current index, which was last revised in April 2000.      Items such as cut flowers and many more vegetables have been included in the WPI basket while the weights of food and fuel items have gone down. Among manufactured products, cell phones, laptops and digital cameras are among items that will be added.      India has one wholesale price index which is released weekly with a time lag of two weeks. There are three consumer price indices for industrial workers, rural workers and farm labourers, with data releases every month.      Though WPI is the key measure of inflation in India, it is not considered reliable as in any given week the prices of only about 16%-20% of the products included in the basket are updated. This is largely the reason that provisional figures are often revised sharply when more data becomes available. The monthly frequency of the new index will make the data more reliable.      "With the time span for collecting data being increased we are expecting a more credible and accurate data system to be in place," said Pronab Sen, the country's chief statistician.      The new series will also see a significant increase in the weight for manufactured products, to around 80% from 63.75%.      "With the monthly WPI in place policymakers will have a more realistic and credible data to rely upon. The provisional figures will be more accurate as there is more time to collect data, while it will be more realistic as it captures price movement in more items. While the monthly inflation data can be used for monetary policy formulation the weekly data on inflation for fuel and food items will help in managing short-term supply-demand issues," said D K Joshi, principal economists at ratings agency Crisil.      Still, economists have long voiced the need for a good consumer price index (CPI) as the main measure of inflation. The CPI is the official inflation indicator in major economies such as the United States, Japan, China and the euro region. While the WPI measures changes in price levels for businesses, it cannot serve as an indicator of inflation at the retail level.      A panel headed by economist Abhijit Sen made its recommendations for a revamped WPI last year. The central bank and the finance ministry opposed the shift to a monthly index but a decision was taken finally in favour of having less frequent but more reliable data.      "We are attempting to source price quotations from more than 10,000 producers. With 6,000 of them giving data on a timely basis we can come out with inflation data which is fairly accurate," said a senior official in ministry of statistics and programme implementation.      With the new law on the collection of statistics making it mandatory for individuals and companies to provide data, collection the information will become more easy, the official added.