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Scrutiny
  
Umm, er, uh...
CPI, WPI, IIP... mistakes confound
29/05/2008

In spite of achieving 8-9% average economic growth and astounding forex reserves of around $300 billion, Indians are worried about inflation, food crisis and energy price hikes. Thus, new adequate policy adaptation has become imperative to curb inflation. Unfortunately, chances of such policies being effective remain foggy as all the basic indicators – be it Wholesale Price Index (WPI), Consumer Price Index (CPI), or Index of Industrial Production (IIP) – are turning out to be outdated and erroneous, thus inaccurate to predict precise economic conditions. While the US, UK, Japan shifted to CPI to measure inflation, India has stuck on to WPI since 1902 [WPI considers 435 commodities’ wholesale prices, which may not always give the current market rate. Over 100 commodities like coarse grains remain in the WPI list, which are clearly insignificant; while many services are yet to be considered]. If WPI seems bad, the fact is that IIP still uses the data base of 1994-95. A special bill was presented in the Parliament to make the data presentation better; it is still pending. Perhaps our politicians don’t realise that erroneous data leads to wrong policies. But hey, there’s so much wrong with our country’s policies anyway, who cares about data!

By:- Akram Hoque
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