Date:01/07/2008 URL: http://www.thehindu.com/2008/07/01/stories/2008070158710200.htm

Tamil Nadu - Chennai

Pronab Sen feels inflation discussion ill-informed

Special Correspondent

Chief Statistician says WPI and CPI are outdated, and need to be updated every five years

“Government more likely to have overestimated inflation rather than underestimated it”
“WPI can often spot the trend before it is reflected in CPI”

— Photo: R. Shivaji Rao

CLARIFYING POINTS: Dr. Pronab Sen, Chief Statistician of India with G. K. Vasan, Minister of State for Statistics and Programme Implementation and M. Naganathan, Vice-Chairman, State Planning Commission, at the Statistics Day function in Chennai on Monday.

CHENNAI: India’s Chief Statistician Pronab Sen feels that much of the discussion on inflation is “ill-informed” and “misleading.” He attempted to “set the record straight” on the occasion of the Statistics Day, the birth anniversary of P.C. Mahalanobis, the doyen of India’s statistics system.

Dr. Sen admitted that the wholesale price index and the consumer price index used to calculate inflation were outdated, since most of their base years were in the late 1980s and the early 1990s, and agreed that they need to be updated every five years. “But this is not a trivial exercise. It is extremely time and manpower consuming, besides being very expensive…We haven’t yet tried to sell data commercially. That might defray some costs,” he said, speaking at the University of Madras on Monday.

He insisted that, contrary to public perception, the government was more likely to have overestimated inflation rather than underestimated it, owing to the nature of the index used.

The other major criticism of the government system is that “the WPI fails to adequately capture the effect of inflation on aam aadmi [the common man] and on the cost of living.” However, Dr. Sen said that while the CPI might do a better job of guiding government policies to mitigate the effect of inflation on the cost of living, the WPI was essential to framing policy interventions for actually controlling and reducing inflation itself. Whether it was a cost-push inflation driven by the rise in the prices of primary products or a demand pull situation of an overheated economy, the WPI could often spot the trend before it was reflected in the CPI.

While developed countries used the CPI alone because of their integrated market systems, India, with its fragmented markets, needed both indices, he argued.

Minister of State for Statistics and Programme Implementation G.K. Vasan said the Central Government was taking steps to curtail inflation. The efforts of the statistical organisations could be critical to this endeavour.

Mr. Vasan announced that the Indian Statistical Institute in Chennai was being upgraded as a centre on a par with those in Delhi and Bangalore. It would meet the statistical needs of the southern region, besides conducting undergraduate and postgraduate programmes.

State Planning Commission vice-chairman M. Naganathan said a viable, dependable database of statistics would aid the Central and State Planning Commissions in working out effective policies. The Commission’s member-secretary Anuradha Khati Rajivan said more work was needed in vulnerability assessment, so that policy interventions could be made beforehand, rather than governments having to deal with the aftermath.

University of Madras Vice-Chancellor S. Ramachandran released a booklet on Tamil Nadu statistics and requested the Department of Statistics to compile accurate date on the higher education system. “We don’t even have complete enrolment data. How can we set any target,” he asked.