With India set to revise its gross domestic product (GDP) base year from 2011–12 to 2022–23 on Friday, economists are divided over whether the parallel lag in rebasing the Wholesale Price Index (WPI) will considerably distort real growth estimates.
The Ministry of Statistics and Programme Implementation rebased the Consumer Price Index (CPI) base year from 2012 to 2024, but the WPI base year — compiled by the Ministry of Commerce and Industry — remains unchanged at 2011–12, raising questions about consistency in national accounts deflators.
Terming WPI “the weakest link in the national accounts”, N R Bhanumurthy, director of the Madras School of Economics, said that even if the basket and weights are not overhauled, the WPI base should at least be pushed forward to avoid large divergences between nominal and real gross domestic product (GDP), as well as in the deflator.
Bhanumurthy pointed to the lack of co-integration between WPI and CPI trends as evidence that “one of them is not reflecting price pressures”. “The assumption is that changes in wholesale prices transmit to retail prices with a lag. My criticism of the existing mechanism is that there is no co-integration between CPI and WPI,” he said.
In an attempt to make national accounts aggregates more conceptually robust, less volatile, and better aligned with international standards such as the System of National Accounts, the statistics ministry is likely to make important changes to the way India deflates consumption, investment, and trade flows in the new GDP series.
Manufacturing will see the most ambitious upgrade, with double deflation introduced for a large set of compilation categories. Annual Survey of Industries-based input baskets and item-wise WPIs will be used to deflate output and intermediate consumption separately, while categories with poor input-price coverage will remain under a refined single-extrapolation regime.
Several economists say the impact on headline real GDP may be limited in practice, as WPI is largely used in a disaggregated, industry-specific manner rather than as a single, economy-wide deflator.
“As far as the WPI is concerned, it is used on an industry-specific basis. It is not used as one single number,” said Pronab Sen, former chief statistician of India. “It would be preferable to have more recent data, as quality and product composition change, but it is not as bad as having an outdated CPI.”
Echoing this view, former Central Statistics Office director-general Ashish Kumar said that in the production accounts, “WPI is usually used in sub-groups or item groups”, with item-level indices where “virtually no difference will occur” due to base-year slippage. He added that the main changes in a rebasing exercise lie in the weighting structure rather than in individual price relatives.
Drawing a parallel with CPI data, P C Mohanan, former acting chairman of the National Statistical Commission, said the differences observed when the new CPI series was introduced were slight at the aggregate level.
T C A Anant, former chief statistician of India, said that at overlapping commodity levels, wholesale and retail price indices “coincide very closely”, and that the larger differences between CPI and WPI stem from their baskets and coverage rather than from price movements themselves.
 "Economists split on unrevised WPI and impact on new GDP base-year series")
