On Friday, the government released the new series of the wholesale price index (WPI) and the index of industrial production (IIP) in which the base year has been changed from 2004-05 to 2011-12. These new series paint a healthier picture of the economy with industrial output expanding at a faster pace than before and wholesale inflation trending lower.
The new WPI series, which gives greater weight to primary articles, comprises 697 items, including 117 items for primary articles, 16 items for fuel & power, and 564 items for manufactured products. Conceptually, the revised WPI series is closer to the producer price index as it does not include indirect taxes.
And as Chart 1 shows, it is more representative in nature, drawing on 8,331 quotations as against 5,482 in the earlier series. Headline WPI trends lower than in the earlier series as seen in Chart 2.
This trend, as shown in Chart 3, holds true across the three major subgroups.
On the other hand, in the new IIP series, the weight of the manufacturing sector has gone up to 77.63 per cent, up from 75.53 per cent before, as shown in Chart 4.
The Central Statistics Office has also updated the list of items covered, by removing 124 items from the earlier list, while adding 149 new items. Industrial activity has expanded at a faster pace than in the earlier series as seen in Chart 5.
But, as seen in Chart 6, in this series too, growth in capital goods, which connotes investment demand, continues to be sluggish, though infrastructure and construction goods have seen an uptick. Surprisingly, both consumer durables and non-durables have seen an uptick in 2016-17. As estimates of gross domestic product (GDP) are in part drawn from these macro-economic indicators, it is likely that the GDP numbers will also see a revision.