Reserve Bank governor D Subbarao slammed the country’s wholesale price-based inflation, and said industrial production data needs to be improved and employment data has to come regularly for effective monetary policy management. The governor indicated that the data inadequacy was impacting the bank?s rate cutting decisions.
The WPI was minus 1.30 for the week ended June 20 compared with minus 1.14 % the week before. But the consumer price-based inflation (for industrial workers) released on Tuesday for May is at 8.63%. Based on the decline in WPI, industry is asking for an interest rate cut, whereas RBI feels the underlying inflation is still too high.
?There is much more to data analysis than simple mathematical formulation between inflation and rate cuts,? Subbarao said while speaking at the third Annual Statistics Day Conference, organised by RBI. He said the data on WPI and IIP should be upgraded on a continuous basis.
According to him, given the fast pace of changes in the structure of the economy in the face of deregulation, liberalisation and competitive forces, the various indices such as WPI or IIP, which attempt to capture the underlying developments in the economy, should be refined and updated continually to provide timely information to policymakers.
In India, given the heterogeneity of the economic structure and large differences in consumption baskets, the system has four consumer price indices, apart from the wholesale price index.
Given the relatively low income levels, food items are a very large proportion of the consumption basket and this is reflected in their weights in the CPI indices (46-70 %) relative to the WPI index (27 %).