Ahead of the Lok Sabha elections, United Progressive Alliance (UPA) managers are in no mood to take chances on the inflation issue. So, at the special Cabinet meeting on Monday, a proposal to introduce monthly inflation data was shelved after Home Minister P Chidambaram warned his colleagues about the “confusion” the new statistics might create.
“This will confuse people. Suppose, one weekly figure shows a lower rate of inflation, while the monthly figure shows a higher rate. Which one will be acceptable?” he asked.
Finance Minister Pranab Mukherjee, who headed the Cabinet meeting on Monday, quickly came in support of Chidambaram and ruled against implementing the new system. According to top sources in the government, the commerce ministry will continue with the current system of announcing weekly inflation data every Thursday, shelving the new monthly data system at least till the coming Lok Sabha elections.
Unlike other countries, the headline inflation based on the Wholesale Price Index (WPI), which measures the price movements of 435 items, is tracked widely instead of the Consumer Price Index as WPI data are released on a weekly basis. The preliminary estimate are released with a lag of two weeks and then revised after a gap of two months.
Top sources said that while the Union Cabinet and the Cabinet Committee on Economic Affairs discussed 50 to 55 proposals in three hours — spending on an average 3 minutes per item — this agenda took almost 10 minutes at the Cabinet meeting. The proposal was to introduce a new system of announcing inflation figures on a monthly basis along with the existing system of weekly release of data. The new system was intended to replace the weekly figures in future.
In a bid to move away from the existing system of reporting inflation data on weekly basis, the industry department had proposed last year that the data be released once a month. The Department of Industrial Policy and Promotion (DIPP) in the commerce and industry ministry is the nodal agency for compiling and disseminating the WPI data.
During a major part of the last year, the government faced a tough political time tackling double digit inflation figures. Along with the opposition, even some allies and supporters like the Left parties came down heavily on the government for not being able to tackle inflation.
Earlier, the finance ministry and the Reserve Bank of India also had some reservations on the grounds that monthly data would delay the policy response.
The reason for movement towards monthly inflation rate was to make headline inflation rate more reliable, as it would give more time to collect data. Only around a fifth of all data is captured when the preliminary estimate was made and final estimate had often varied by nearly 2 percentage points last year.
