New Delhi: Starting Tuesday the government will release the nation-wide Consumer Price Index (CPI) on a monthly basis for better reflection of retail price movement and to help the Reserve Bank take effective monetary policy steps to deal with inflation.

The new CPI,according to experts,will eventually replace the Wholesale Price Index (WPI) for policy actions to deal with the price situation.

The monthly CPI will be in addition to the three retail price indices — for agricultural labourers,rural labourers and industrial workers — prepared by the Ministry of Labour.

The new data will be prepared by the Ministry of Statistics and Programme Implementation (MOSPI).

“CPI uses defined basket of goods and services that represents purchasing pattern of a particular household. Since this is driven from the consumption side,it provides a relatively realistic view on how consumers are affected,” Deloitte,Haskins & Sells Director Anis Chakravarty said.

He said that for these reasons a reliable indication of demand side pressures and inflation is received from utilizing CPI as a measure.

Welcoming the new index,experts said it will take time,may be few years,before the CPI will replace WPI as benchmark for the government decision making and RBI’s monetary policy.

WPI,as per Chakravarty,”poorly reflects the cost of living because it does not focus on the prices at which the consumer is purchasing the goods”.

The WPI measures the price changes from the production side and not from the consumption side and hence it provides a skewed picture,he added.

Globally also the consumer price index is taken as the main benchmark.

“Globally,the CPI is the major indicator. However,in India it will take some time before the CPI replaces the WPI as the benchmark,” Standard Chartered Economist Anubhuti Sahay said.

The MOSPI had launched the new nationwide CPI from January 2011,without quoting the inflation rate so that the data gets stabilised.

Tuesday’s number will give inflation based on retail prices in rural,urban and all India basis.

The government had said that CPI will “reflect the actual movement of prices at the micro-level and help policymakers like the RBI in better framing of decisions.”

The CPI, based on retail prices,stood at 113.9 points in December compared to 114.4 points in November,as per data released last month. It had taken the whole year of 2000 as the base with 100 points.

Meanwhile,inflation based on WPI was 6.55 percent in January this year.

Asked about the likely movement of the CPI,Chakravarty said: “With CPI,inflation may increase or decrease depending on the dynamics of the economy. For example,WPI gives more weightage to fuel whereas CPI gives more weightage to food items.

“Currently,prices of both goods are rising. Therefore if India switches to CPI variability will depend largely on these two components.”

Beside,the CPI will also factor in movement of prices in the services sector,something not done by the WPI. The services sector account of over 55 percent of India’s GDP.

These consumer indices include five major groups — food, beverages and tobacco; fuel and light; housing; clothing, bedding and footwear; and miscellaneous items.

The data for the index is collected from 310 cities and towns and over 1,180 rural centres.

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