New Delhi: It could be too early to rejoice over the falling inflation rate, which eased to 4.8% as of 2 June, as the price index may have actually risen at a faster pace.
An analysis of government data reveals that the Wholesale Price Index (WPI) was revised upward in final figures compared to provisional estimates in as many as 50 out of 54 weeks between 1 April 2006 and 7 April 2007.
The government releases provisional estimates every week with a time lag of two weeks and it is this figure that grabs media headlines. But along with the provisional estimates, the government also releases final figures of a week with a two-month time lag, which are buried under the data.
For instance, the latest provisional inflation data was released on 15 June, which showed that the WPI index rose by 4.8% for the week ended 2 June. But the final figures released on the same day pertain to the week ended 7 April, which showed that inflation actually stood at 6.44% instead of 6.09% given in the provisional data.
Going by this trend, inflation for the week ended 2 June may actually be higher than the provisional 4.8%. This will only be known when the final figures are out in August.
The change in initial and final figures varies from as little as 5 basis points to as high as 71 basis points, with the maximum variation seen during September 2006.
For example, final figures during the weeks ended 3 March and 10 March were revised upward to 6.51% from 6.46% earlier. Similarly, final data rose to 4.72% from 4.67% in the week ended 22 July last year.
On the other hand, final inflation figures for the week ended 16 September stood at 5.27% against 4.56% provisionally, an upward revision of 71 points.
According to the analysis, there were only two instances when the final number was lower than the provisional. This was for the week ended 3 February and 10 February, when final data put the index at 6.58% and 6.52% compared to the provisional estimate of 6.73% and 6.63%.
“The data is not concocted. This is a mathematical problem in collection and computation,” Mahesh Purohit, director, Foundation of Public Economics and Policy Research told PTI.
He said the government should revamp the index by including relevant goods and services and changing the weightage of existing items taking into account the current consumption pattern to correctly reflect the price movement.
The RBI is already working on a new Harmonised Consumer Price Index as the present indices — the CPI and WPI — have become less representatives due to the growing clout of services in the consumption basket.