India's New WPI Series Likely By October

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A new series of wholesale price index (WPI) is likely to be out by October with a revised base of 2004-05, an updated portfolio and increased data points that will result in minimizing the weightage of food inflation, reports the Business Standard.

The weightage of primary articles will be lowered to 10% from existing 22.02%, while that of manufacturing products category will be increased to 80% from 63.75% at present. The inflation rate, hereafter will be driven by wholesale prices of manufactured products instead of commodities like rice, cereals, pulses and wheat that form the essential consumption basket.

Economists are of the view that the impact of food inflation was already minimized and this was evident from the fact that inflation has been trending lower since November 2008 and moving into negative territory in May 2009 despite food inflation continuing to range between 7% and 10%. That said analysts also point that the anomaly of consumer price inflation remaining in double digits and the wholesale price inflation languishing in negative territory is due to the lesser weightage being accorded to food items in WPI.

Chief economist of YES Bank, Shubhada Rao said that the WPI-based inflation rate, which is widely followed than the CPI should of course, be less misleading for the common people. He said that the monetary policy will not be impacted because it generally pertains to the demand side, whereas food prices are related to the supply side.

(Market News Provided by RTTNews)