New Delhi, Sep 19 (Calcutta Tube) The government’s Chief Economic Advisor Kaushik Basu Friday saw a silver lining in the new benchmark Wholesale Price Index (WPI).
He pointed out that the new WPI, though reported food inflation figures for recent months at a higher level compared to those shown by the old one, showed that the food inflation is falling.
The old index showed a rising trend, with food inflation for July and August at 10.3 percent and 11.1 percent. The new index showed a downward trend, falling 14.6 percent in August from a high of 18.1 percent in July this year, he said.
‘The food inflation is higher than what we were given to believe under the old index, using 1993-94 base,’ said Basu. ‘But by the same token there is a bit of good news. If we rely on the new index, we find that the food inflation is coming down.’
‘So which one should you trust?,’ he asked and then said: ‘The truth is that new index gives a more accurate picture of inflation.’
Pointing out that the new WPI has shifted to base year 2004-05 from the old 1993-94 and has begun tracking the prices of more commodities, Basu said: ‘This is a welcome revision that reflects the changing consumption pattern of our society.’
Utilizing the two contradictory features of the new WPI – one showing higher food inflation but a downward trend, as compared to the old one, Basu sought to drive home the point that there was no fudging of figures in the new WPI by the government to show a rosier picture of economy.
‘I can vouch for it, I did not find any attempt in the government to show a better state of economy,’ said Basu.
Had there been fudges, it would have shown uniformly positive outcomes, he added.
Basu, in fact, began with dubbing the time of adoption of new WPI as one of ‘deluge of information’ on economic front that added to the confusion.
‘This has not been an easy month for those of us engaged in economic policy-making in India because of the deluge of information pertaining to growth, inflation and monetary policy that we received,’ he said.
‘The inflation figures over the last three weeks have been mixed, giving rise to confused signals. And in case you did not find these confusing enough, we in government decided to throw in our bit by switching over to a new Wholesale Price Index this month,’ he added.
Basu, however, had a word of praise for the government.
‘Despite this mixed performance on inflation I do give government high marks for its navigation through this difficult problem.’
‘No matter what some critics claim, the fact is that there is no known formula for how much fiscal and revenue deficits and what levels of repo, reverse repo, CRR and SLR lead to a desirably low benchmark rate of inflation,’ he said.