Inflation data based on monthly WPI series from new year

The Centre plans to release inflation figures based on a revised wholesale price index (WPI) series, with 2004-05 as the base year, from the start of the new calendar year.
“The test run of the new series is now under way, based on price data received from about 3,500 manufacturing units.
“The idea is to extend this universe to 5,000-plus firms, from where the entire backlog of weekly price information since April 2004 is to be sourced and which can, then, be used to generate the relevant product and group-wise indices,” a senior official involved with the exercise told Business Line.
He said the target is to construct the new WPI series and take it up with the National Statistical Commission by end-October. “After that, we need about two months to stabilise the flow of the new data, which can be received online by the Office of the Economic Advisor (OEA) and automatically processed through software developed by the National Informatics Centre. So, by end-December or early-January, the inflation numbers derived from the new series could be ready for launch,” the official added.
The existing WPI series, having 1993-94 as the base year, covers 435 commodities, which include 98 ‘primary articles’, 318 ‘manufactured products’ and 19 ‘fuel, power, light & lubricant’ items. The proposed 2004-05 base series will have 1,224 commodities. While the ‘primary articles’ and ‘fuel’ groups will have more or less the same number of items — 105 and 19, respectively — there would be as many as 1,100 ‘manufactured products’. Price quotations
Also, in each of these individual commodities, it is planned to obtain at least five price quotations. This is against the present WPI series, where of the total 435 items, there are 214 (with a combined weight of over 36 per cent) represented by three or less quotations and as many as 86 with single quotations.
“Covering 1,200-plus commodities and having a minimum of five quotations for each of them is ambitious. But, with 5,000-odd reporting firms who are required to submit data online to the OEA only once a month, it is not difficult,” the official pointed out.
Currently, the OEA releases weekly WPI inflation every Thursday. The Working Group for Revision of WPI Numbers, headed by the Planning Commission Member, Prof Abhijit Sen, has recommended changeover to a monthly index in line with standard practice in other countries. The idea has, however, not found complete favour with the Finance Ministry and the Reserve Bank of India.
“It is a trade-off you have to make between more frequent, less reliable data (as is now the case) and less frequent, more reliable data. Maybe once a proper system of flow and processing of data at the planned levels gets established, it is possible to release weekly indices as well,” the official added.