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Journalism of Courage
Economists often tell the story about the drunk,the coin and the lamp-post. A drunk is searching around a lamp-post for a coin. On being asked where he dropped it,he waves unsteadily in the darkness beyond reach of the lamp-posts light. Why not look there? Because,he tells you,the lights over here. The point,for economists,is that our approach to problems is frequently warped by what data we have available. We tend to search for the solution in the light of good,comprehensive data even when the problems somewhere out there in the dark. For a very long time,Indias inflation discussion has been premised around the wholesale price index WPI. Thats because the WPI appears with less of a time-lag than the consumer price index CPI,and macroeconomic policy needs the most timely data possible in order to respond nimbly. Its also more comprehensive than the CPI the equivalent of the retail price indices that are,for solid theoretical,practical reasons,used internationally.
But it isnt very useful for several reasons. First,it doesnt include the services sector,60 per cent of the Indian economy. Neither does the old CPI. This severely compromises its reach. Second,a large proportion of wholesale prices are of tradables goods and commodities subject to international prices. Having the primary index of local prices so sensitive to prices set outside your economy warps both national discourse and policy-making. Finally,it doesnt have the right weights. In constructing an
This is an important step towards modernising Indias most basic diagnostic data. The next step is to ensure that its used as the essential building-block for policy work.
