Why Truncate the Wholesale Price Index?

The government has taken the astonishing decision to truncate the release of the wholesale price index (WPI) into (i) two weekly indices separately for “primary articles” and commodities in the “fuels, power, light and lubricants” group, and (ii) a monthly index for all commodities.

In deciding on the new wholesale price indices, the government appears to have been overwhelmed by the immediate problem of having to cope with sharp price increases of food articles. The construction of a sound statistical index should not be guided, however, by these momentary trends; it should rather be guided by long-term analytical needs and the requirements of policy operations. The composite WPI that was in use hitherto has helped the monetary authorities, for instance, to segregate “core” inflation from “headline” inflation. It is the presence of timely information on inflation aligned with the availability of information on monetary and financial conditions for different seasons that has facilitated appropriate policy responses.