Welcome new price index
The Economic Times, 20 October 2009, ET Editorial
ET Bureau
The government has decided to release data for manufactured goods in the wholesale price index (WPI) with a monthly frequency, even as data on
primary goods and fuels would continue to be released every week. Further, the revamped WPI would cover about 900 items instead of 435 at present, and the base year is being brought forward from 1993-94 to 2004-05. These changes would make the price index more reliable as a policy guide. However, the government needs to press on with its agenda of price index reform: a producer price index, several and combined services indices, and an expanded consumer price index that better reflects today’s urban consumption.
There is little sense in releasing manufacturing price data on a weekly basis, when only 16-20% of the WPI items are updated. For the rest, the common practice has been to repeat the data of the previous reported week, as companies continue to be indifferent on reporting price data on a weekly basis. The Collection of Statistics Act is yet to become operational law, shielding truant companies from penal action. So price data have been subject to high volatility: the revised numbers come eight weeks after the provisional ones and often look vastly different, too. The monthly release of inflation data should give the Office of the Economic Adviser, attached to the department of industrial policy & promotion, enough time to improve reporting to cover perhaps 60% or more of manufactured products.
Shifting to the new series was overdue, after nine-and-a-half years. Ideally, price series as well as other series such as the ones for industrial production must be revised more frequently, say, every five years, to capture the changes in the economy, industrial activity and the consumption basket. India is notoriously backward on this count. For instance, prior to shifting to the 1993-94 series for WPI in April 2000, the reference year was 1981-82. The efficacy of the new index would be proven only if the margin between the revised numbers and the provisional numbers is narrowed.
The Economic Times, 20 October 2009, ET Editorial
ET Bureau
The government has decided to release data for manufactured goods in the wholesale price index (WPI) with a monthly frequency, even as data on
primary goods and fuels would continue to be released every week. Further, the revamped WPI would cover about 900 items instead of 435 at present, and the base year is being brought forward from 1993-94 to 2004-05. These changes would make the price index more reliable as a policy guide. However, the government needs to press on with its agenda of price index reform: a producer price index, several and combined services indices, and an expanded consumer price index that better reflects today’s urban consumption.
There is little sense in releasing manufacturing price data on a weekly basis, when only 16-20% of the WPI items are updated. For the rest, the common practice has been to repeat the data of the previous reported week, as companies continue to be indifferent on reporting price data on a weekly basis. The Collection of Statistics Act is yet to become operational law, shielding truant companies from penal action. So price data have been subject to high volatility: the revised numbers come eight weeks after the provisional ones and often look vastly different, too. The monthly release of inflation data should give the Office of the Economic Adviser, attached to the department of industrial policy & promotion, enough time to improve reporting to cover perhaps 60% or more of manufactured products.
Shifting to the new series was overdue, after nine-and-a-half years. Ideally, price series as well as other series such as the ones for industrial production must be revised more frequently, say, every five years, to capture the changes in the economy, industrial activity and the consumption basket. India is notoriously backward on this count. For instance, prior to shifting to the 1993-94 series for WPI in April 2000, the reference year was 1981-82. The efficacy of the new index would be proven only if the margin between the revised numbers and the provisional numbers is narrowed.
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