News APP

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  gplay

Home  » Business » Govt defends new inflation indexes

Govt defends new inflation indexes

Source: PTI
November 06, 2009 15:52 IST
Get Rediff News in your Inbox:

With wholesale price inflation not reflecting true picture of food prices, the government on Friday justified the introduction of separate index numbers for primary products and manufacturing items, saying the new mechanism give better reflection of price movements.

"So this change enables everyone to know reality. . .," Industrial Policy and Promotion Secretary Ajay Shankar told reporters.

He said the idea behind coming up with separate inflation numbers for primary articles -- items found in raw form -- and manufactured products is that prices of these two categories move somewhat independently at times.

"So, the results which have come out has shown that food inflation has been high whereas wholesale price index was quite low in the preceding month," the official said.

The government has for the first time come out with separate wholesale price index numbers for primary articles, fuels, and will issue another index on a monthly basis for all commodities, including manufacturing, next week.

Shankar said inflation numbers to be released on November 12 will be based on old time series, that is based on 1993-94 prices.

He said the new series will be out very soon. The new series will be based on 2004-05.

Primary articles have a weight of 22 per cent in wholesale price inflation, while fuel articles and manufacturing items account for around 14 and 66 per cent, respectively.

As a result the index numbers are skewed towards manufacturing numbers and may not reflect true picture of food price increases.

In fact, because of higher weight of food items, around 60 per cent, in various consumer price indices, retail inflation is much higher than wholesale price index numbers.

Get Rediff News in your Inbox:
Source: PTI© Copyright 2024 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.
Related News: Ajay Shankar, Promotion
 

Moneywiz Live!