and the consumption patterns are converging in rural and urban areas.
Q: Why did the WPI food inflation show a sharper rise than CPI food inflation in August even though food items have a greater weightage in the CPI?
Even this is possible. The retail margins used to be as high as 40-50%. There can be a situation where retailers are unable to maintain such high margins and are cutting down on them. In such a scenario, it's possible that retail prices can rise at a slower pace even as wholesale prices rise faster. There exists a bigger scope for margin compression at the retail level.
Q: Is there a need to fine-tune the CPI data?
Q: Coming to the index of industrial production (IIP), we see a higher degree of volatility in recent years, especially for capital goods. This is posing a challenge to the government and RBI in framing policies. What's your take on this?
Volatility has been there in the IIP all along. Let me give you an example. When a company supplies a boiler after four months, the month when it is delivered shows a spike in the capital goods index. Now you can't have a situation when the boiler is delivered in bits and pieces over those four months. Even take the example of electric cables where the orders come in for thousands of kilometres. In the month these cables are delivered, the index will show a sudden jump and when they are being manufactured, you don't see them getting reflected in the index.
Also, people keep missing out on things. When we changed the IIP base to 2004-05, we dropped the small scale industries, which comprised 40% of industrial production. Earlier, you had a situation when the IIP was coming out with just 20% responses. That was ridiculous. You had a comprehensive index and bad data. Now, the IIP is only for the corporate sector and does not cover SSIs. Now we get 65% of the response in the first estimate and 90% in the first revision of the monthly