Get them right

wholesale price index (WPI), commonly known as inflation, an accurate barometer of the price line in the country? Thursday’s headline
inflation numbers don’t reflect the harsh reality of prices in the marketplace. Though inflation numbers have begun to ease, down to 10.68 per cent, prices of some essentials remain high. So, there is obviously a disconnect between cold inflation numbers and the prevailing prices in the market. Why is this happening and why can’t this anomaly be corrected? Does a cold statistic of 10.68 per cent WPI mean anything to most people? The need to rejig the wholesale price index is an imperative not lost on the government, but a strange sort of bungling is not allowing any progress on this front. Aware that there are statistical infirmities, the government is now talking of finally releasing the WPI numbers only once a month. This way, the fear factor will be curbed some-what. Though with the financial world collapsing, inflation is the least of the worries for policymakers. However, prices remain the single most important item on the voter’s radar. The change in WPI is coming after much delay and plenty of money having been spent. On April 1, 2000, the government introduced the new WPI using 1993-94 as the base year. It junked the earlier base year of 1981-82 and changed the composition of the constituents and their weightage. Primary articles were actually reduced to 22.02 per cent from as much as 32.30 per cent in the new basket while the weightage for fuel, power, light and lubricants was jacked up from 10.66 to 14.23 per cent and finally the weightage for manufactured products was ramped up from 57.04 to 63.75 per cent. The government cannot hope to get votes on the nuclear deal, nor can it sell reforms to the poor; it needs to poleaxe the price line. It is ‘mehengai’ which matters to Indian voters. So how does one do that? For starters, the base year for WPI has to be changed quickly. Around March 2004, a working group was set up to revise the current series of WPI. The idea was to assign new weights to individual commodities whose weekly price movements are taken into account while computing the WPI. The new base year, which was reflective of contemporary consumption trends, was seen to be 2004-05. Four years later we’re still waiting. The country’s chief statistician, hampered as he is with faulty data collection, believes that changing the base year is a radical exercise. It entails increasing the number of firms and the number of products. In mid-July, the government held a meeting where various government departments debated the urgency of first getting accurate data and then collating and effectively reading it. It is reckoned that as many as 6,000 new companies and a whole catalogue of new products needed to be part of this exercise. Only after that will the chief statistician and his team be able to filter the new data with complete veracity. Changing the base year is vital since the country’s consumption trends have changed dramatically over the last 15 years. And remember, India unlike most rapidly growing economies is a consumption economy; as much as 67 per cent of our GDP is consumed locally. It remains to be seen whether the weightage given to primary articles, fuel, power, light and lubricants and manufactured products will also be realigned to reflect new market realities. New products will have to be introduced. For a country that prides itself in being a technology harbinger in the world, it is truly an anachronism that we cannot collate data on WPI efficiently. Why has it taken so long in the first place to revise the base year and why is it that we cannot get this matter of great import right? While we pat ourselves for controlling the ogre of inflation, the revised estimates buried in the fine print reveal that inflation for weeks gone by is still over 12.5 per cent. What does that tell you? That the genie is still prancing out of the bottle.