In its annual policy, the Reserve Bank of India (RBI) had taken cognisance of the recently-released inflation numbers based on the consumer price index (CPI). However, it would take three to five years for the new series to stabilise.
The CPI data for April is scheduled to be released tomorrow.
The CPI inflation series is much wider in scope than the one based on the wholesale price index (WPI), as it has both rural and urban figures, besides state-wise data. The new series, with 2010 as the base year, also includes services, which is not the case with the WPI series. Though currently there are three separate CPI index-based inflation rates, these are segmented, catering to rural labourers, agricultural labourers and industrial workers.
|A STEP FORWARD
|Weightage of food products (%)
|Weightage of energy products(%)
|Weightage of miscellaneous items (%)
|Source: Ministry of Statistics and Programme Implementation
Officials in the Ministry of Statistics and Programme Implementation (Mospi) said it would take another year to compare CPI inflation data, as the inflation series was brought out in February, and this showed the data for January. So far, three monthly inflation figures, based on the CPI, have been brought out. Though the CPI was started in February 2011, at that time, no inflation data was available and only index figures were released for a year.
However, former chief statistician and Principal Advisor, Planning Commission, Pronab Sen, said the CPI data released now couldn’t be used for any meaningful and analytical work for seven-eight years, as one would not be able to generate seasonality factors. “Any analytical work requires you to be able to correct that seasonality,” he said. However, in 10 years, one would be able to use the CPI, he added.
In the first three months, consumer inflation was higher than WPI-based inflation. While WPI-based inflation stood at 6.89 per cent in January, 6.95 per cent in February and 6.89 per cent in March, CPI inflation was 7.65 per cent, 8.83 per cent and 9.47 per cent in the respective periods. This was primarily due to an increase in food inflation, as at 49.71 per cent, food items have much higher weightage in the CPI, against 24.3 per cent in the WPI (including manufactured food items).
In its annual policy, RBI had said, “Even as WPI inflation has softened, inflation, as measured by the new series of consumer price index (CPI), suggests price pressures are still high at the retail level.”
Unlike WPI, CPI is a vast pool of data. While India Post collects data for rural areas, the National Sample Survey Organisation collects figures for urban areas. Price data from 1,181 villages and 310 towns is collected and sent to Mospi’s web portal, which has provisions for scrutiny of tables to check any large variation in data.
“We have provided training for a year and a half to Department of Post personnel to collect data on price statistics, as the rural data is collected by postmen,” said a Mospi official. The 4,75,000 observations are processed by a 15-member Mospi team, before the data is released on the 18th of every month.
Items within the larger category of weighted items vary from region to region, depending on consumption patterns, and this offers a better idea of price movements.
According to economists, from the consumers’ point of view, the CPI is more helpful, as it also takes into account different consumption patterns in different regions. In fact, consumption patterns in places as close as Mumbai and Pune differ substantially, said an economist.
The CPI also has an edge over the WPI, as it includes some services in the miscellaneous category like education, medical care, recreation & amusement, transport and communication, personal care and effects, and household requisites.
However, for now, RBI would have to consider both the WPI and the CPI for policy decisions. Some economists even feel the WPI would have to be there even if the CPI stabilises, to gauge movement in wholesale prices. It would also offer a picture of production.
Mospi said there was still scope for improvement in data collection, and this would happen over time.