Editorial: Index improvements

The second proposed change is with respect to the WPI alone, which does not therefore involve any turf battles, and so is far more likely to be implemented soon. The proposal is to shift from weekly to monthly reporting of the WPI numbers. Observers have been quick to attribute political motivations to this suggestion; given the pressure that the government is facing every week as the inflation numbers reach ever higher, it could buy itself some welcome relief if the numbers were released less frequently. While this may have been a consideration, the idea needs to be assessed on its technical merits, of which there are quite a few. The justification provided by the government, that the high frequency leads to lots of errors as the prices of many commodities are not updated every week, is a valid one. Large corrections with longer intervals introduce unnecessary volatility in the index. If a less frequent release allows for more accurate reporting of data across the entire basket of commodities, then the index will be a far more useful indicator for macroeconomic monitoring and management. International practice tends to follow a monthly release pattern and India should too, if a lower frequency leads to greater accuracy. Since monetary policy announcements are scheduled on a quarterly basis, there is really no value being added to the process by the higher frequency. But, more effort needs to be put into updating individual prices.