New WPI more elaborate; inflation to come down: Montek

"They have rebased it (WPI) in sync with the latest consumption pattern. It is a better indicator of what the inflation rate is now," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters. Inflation for August stood at 8.5 per cent, according to the new WPI series with the base year of 2004-05, released by the government.

As per the old series, which was based on 1993-94 prices, the inflation stood at 9.5 per cent for the month.

Overall inflation in August witnessed a fall of 1.3 percentage points from 9.8 per cent in the month of July, as per the new series. This is the lowest figure in the last seven months.

"It is desirable to change the base because over a period of time consumption (pattern) of consumers changes, so any sensible price index should get rebased," Ahluwalia said. Consumer items widely used by the middle class, like ice-cream, microwave ovens, washing machines, gold and silver are reflected in the new series of WPI inflation.
The new WPI series has 241 more items. With the additional items, the WPI now measures a total of 676 items against 435 earlier.

"Updation of inflation (index) was absolutely essential because the earlier index had gone out of range. We should not mind the change at all," he further added. Asked about softening of inflation, Ahluwalia said, "In case of the old index also, the annual rate of inflation is coming down but year-on-year level seems to be lower."

"The real question is that will this decline continue? I think it will," he said. Ahluwalia, however, refused to predict the dip in overall inflation by December. "I will see this index (WPI new series) in detail before I can say what I think it is going to be in December," the Plancomm Deputy Chairman said.

Earlier, Ahluwalia had said that WPI would come down to around 6 per cent by end of December, as per the old index.