North Block, RBI oppose monthly WPI plan

The finance ministry is opposed to the proposal as it feels the switchover would delay policy response to combat inflation. "At the moment, there is a two-week time-lag in reporting the WPI data. If the data are now reported on a monthly basis, the lag will increase to six weeks. That will make timely policy interventions by the government difficult," a senior official in the ministry told Business Standard.

The RBI, which is also a key user of the data, has also expressed its objections to the move. Its representatives have said as much in internal discussions between officials involved in a group that is finalising a new-look WPI.

The central bank, which targets inflation through monetary policy interventions, closely watches weekly WPI data and uses them for continuous internal assessment in order to prepare the monetary response. "The RBI releases statistical supplements on a weekly basis. They will face serious difficulties if the present practice is discarded," the finance ministry official added.

A final call on whether to proceed with the proposed changeover will now be taken by the Union Cabinet.

The WPI-based inflation rate has been the cause of severe political pangs for the government every Friday. With inflation skyrocketing for a variety of reasons including delayed revisions, a monthly reporting frequency was expected to increase accuracy of the data, reduce the extent of variation between the provisional and the final data which have a six-week gap at the moment. Most developed countries also report inflation on a monthly basis.

The proposal to change the frequency is being finalised by the working group for a new WPI index headed by Planning Commission member Abhijit Sen. The group, which last met on April 30, has finalised the technical part of the report, which has already been submitted to Sen for his vetting and final approval. Once Sen clears it, the report would be submitted to Commerce and Industry Minister Kamal Nath.

The Department of Industrial Policy and Promotion (DIPP) in the ministry of commerce and industry, which is responsible for collating and disseminating the WPI data, is of the view that a monthly WPI will increase its accuracy. "At present, if we do not receive data in time from the sources, there is no time left to try again. If we have a month, we can get back to the data sources and somehow collect the relevant price quotations. This will also reduce the extent of revisions to provisional data," a DIPP official said.

However, the finance ministry official does not agree with this view. "For 60 years, WPI is being reported on a weekly basis. We have been telling the whole world that we are the only country which releases inflation data on a weekly basis. In this era of technology, you cannot give an excuse of data unavailability as the reason for changing the reporting freqeuncy to a monthly one," he added.