Govt plans to revise WPI base year to 2010-11

Amid concerns expressed by the RBI over wide variation in provisional and final data, the Industry Ministry is looking at revising base year to 2010-11 for computation of inflation index with a view to present more realistic picture of the price situation.

The government, in September 2010, changed the base year for calculating Wholesale Price Index (WPI) from 1993-94 to 2004-05 to give a better indication of changes in prices of commodities.

"In view of the fast changing developments, we are again thinking of changing the base year for WPI. We thought of 2009-10 but the idea did not find favour as it was a bad year because of the impact of global economic crisis. We may adopt 2010-11 as the new base year," an official said.

Reserve Bank Governor D Subbarao earlier this month had expressed concern over the wide variation in macroeconomic data, including those on growth and inflation.

"In the RBI, we are handicapped by the reliability of some of the basic data that we need to use in policy calculations...Each time when we have to make an assessment of inflation situation, we are left to double-guess how the provisional numbers may be revised upwards," he had said.

The move to revise WPI data, a source said, would help in narrowing the gap between the provisional and final data and provide more updated inputs necessary for formulation of policies.

"Currently, a variation (between provisional and final numbers) of about 1% is coming in the new WPI index," the source said.

The new index, with 2010-11, is expected to have new items, which would provide a more realistic picture of price rise and its impact on people, the official said, adding most of the additions could be in the manufactured products category.

"If the DIPP will start the process now, the exercise can be completed in 15 months and by April 2013, we can come out with the new WPI index," the source added.

The Department of Industrial Policy and Promotion (DIPP), an arm of industry ministry brings out the inflation data.

Currently, the WPI measures a total of 676 items against 435 earlier. The new items added include readymade food, computer stationary, refrigerators, dish antennas, VCDs, crude petroleum and computers. In the primary article group, few products were being added.

Overall inflation for the month ended June stood at 9.44%.