"A bird in hand is worth two in the bush, but the fact remains that the upgradation to the base of 1993-94 still leaves a substantial gap in making the WPI-based annual inflation rate more comprehensive," said highly-placed sources in the expert committee set up for the revamp of the wholesale price index (WPI) system.

For one, the attempt was to make the WPI inflation rate more updated to the current levels of prices but the fact remains that many commodities available at that point of time, in 1993-94 that is, are no longer existing or for that matter many of the brand names have gone out of the market and newer brands come in.

Moreover, the authenticity of the data still remains an enigma.

"Even as the basket has been enhanced and the weightages have been revamped but the data collection procedures remains the same," says Bibek Debroy, a leading economist. With this, many feel that the data may be even invented or doctored to favourable terms. The criterion adopted for inclusion of the brands in the WPI has been the sales turnover. Any brand doing sales of more than Rs 120 crore in the year 1993-94 has been included in the WPI.

"In 1993-94 Maruti cars had the largest market share so its representation in the index is dominant but today other new brands like Hyundai, Daewoo and Telco also affect the prices but these have not been included," said BB Bhatacharya, head of IEG.

"Items like computer software and newer television brands have not found any place in the WPI," said leading economist DH Pai Panandikar.

On similar lines, the 193-94 series completely skirts the changes occurring in the corporate spheres and the resultant product creations. Take for instance the merger of Brooke Bond with the Lipton in the post 1993-94 era. But since the WPI takes into account products in the market place in 1993-94 it still has the Brooke Bond while other new brands are not included. "A big hole in the WPI is the absence of any representation of the services sector," said Bhatacharya. "Even as the transport costs and railways freight movement costs are taken care of yet the prices of important services like rent, education, health find no place in the new revised WPI system," he adds. So even as the Government has upgraded the base to 1993-94 and changed the weightage ratios the yawning difference between the actual price rise and the headline inflation rate as measured by the wholesale price index is here to stay.

IEG revises three-month inflation forecast
The Institute of Economic Growth (IEG) has revised its forecast for the next three months following the Government's upgradation of the base year to 1993-94. As per the new revision IEG forecasts the point-to-point annual rate of inflation based on the wholesale price index (WPI) computed as an average of the four weeks of the month of April to stand at 4.28 per cent; for the month of May it would rise to 4.5 per cent while for the month of June it will stand at 4.81 per cent.

At the retail level, the point-to-point annual inflation rate based on the consumer price index for agricultural labourers (CPIAL) for the latest recorded month of March has registered a rise to 3.38 per cent while that for the rural labourers it has increased to 3.72 per cent. Inflation based on CPI-AL stood at 8.82 per cent in the corresponding month in the previous fiscal while that for CPI-RL stood at 8 per cent. In the previous month of the current calendar year inflation as per CPI-AL stood at 3.03 per cent while that for rural labourers stood at 3.02 per cent.