India’s wholesale price index (WPI), the inflation measure most widely followed by policy-makers and investors, does not need another revision after the release of the final number eight weeks after the provisional numbers, as more than three-fourths data are collected by then, Pronab Sen, chief statistician, Ministry of Statistics has said.
Earlier, Arvind Virmani, chief economic adviser to the finance ministry, had suggested that the system of finalising the WPI number within just two months of the release of the first number should change for more accuracy as policy decisions are based on this measure.
“The final estimate of the WPI number is good enough,” said Sen, who is also the secretary of the National Statistical Commission. “After that (two months), it’s really a sort of fine-tuning,” he added.
At present, the WPI consists of 435 products and almost five price quotations for each product. It does not measure the services sector, which accounts for more than half of India’s output. The data are collected and released by the Department of Industrial Policy and Promotion (DIPP) every Thursday evening. As the WPI is the first inflation measure to be released by the government, it has gained popularity. In other countries, the consumer price index (CPI) is the most referred price increase measure.
One of the main criticism of the WPI is the difference between provisional and final numbers. In the current calendar, the difference between the provisional and final numbers was to the extent of 185 basis points (bps) in mid-March. The difference fell to 35 bps by mid-May.
The difference is due to poor response from the manufacturing sector when the provisional numbers are released within a fortnight, said Sen. He said the DIPP was able to collect only 20 per cent of the data sought from the manufacturing sector when the first numbers are released. But when the final numbers are released, the response increases to 65 per cent, he added. There is 100 per cent reporting in primary goods. “By the time the final WPI numbers are released, we get 80 per cent sample size,” he said.
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The statistician, however, said the difference between the provisional and final WPI numbers is a good indicator of inflation in the coming months. He said if the difference reduces, it suggests that inflation is slowing or stabilising. On the other hand, if the difference widens, it means inflation will grow at a faster rate in the coming months, he said.
GDP numbers are revised many times before a final estimate is released two years after the end of the financial year. For example, GDP estimate for the 2007-08 fiscal will not be available until the middle of calendar year 2010.