The Reserve Bank of India on Tuesday questioned the reliability and frequent revisions of some of the basic data that the RBI needs to use in policy calculations. The RBIs policy formulation is handicapped by frequent revisions to data. We make policies in real time and if the provisional data that these are based on are inaccurate,the resultant policies can turn out to be sub-optimal choices, RBI Governor D Subbarao said. Take estimates of GDP growth. For the year 2009-10,the advance estimate of GDP growth rate at market prices from the expenditure side,that came out in February 2010,was 6.8 per cent. That was changed to 7.7 per cent in the revised estimate in May 2010 and further to 9.1 per cent in the quick estimate in February 2011. The policy that perforce had to use information on advance estimate of GDP was fraught with the risk of underestimating the growth momentum, Subbarao said. The more critical data on wholesale price index (WPI) inflation too has been subject to large revisions. The Index of Industrial Production (IIP) is another statistic that has shown counter-intuitive trends. During the peak period of the global financial crisis growth was positive according to the then available IIP series. This was contrary to the RBIs assessment of some deceleration due to the crisis. Why RBI opted for WPI over CPI? RBI Governor D Subbarao said the apex bank opted for WPI (wholesale price index) over CPI (consumer price index) as a second best choice for a number of reasons. First and most importantly,we do not have a single CPI that is representative of the whole country. Until recently we had four,and of those,currently we have three CPIs representing different segments of the population. While WPI is computed on an all-India basis,CPIs are constructed for specific centres and then aggregated to an all-India index, he said. Second,WPI is available with a slightly shorter lag than the CPIs. Third,WPI has a broader coverage than the CPIs. Finally,the revision of the basket for CPI series lags that of the WPI series.
