As we place greater emphasis on low inflation and price stability, we also need to improve communication with respect to the understanding of inflation. At present, headline inflation in India is indicated by the weekly release of the All India Wholesale Price Index (WPI). Most countries use the Consumer Price Index (CPI) instead.
The CPI is difficult to use in India because of the existence of 4 indexes of CPI, each reflecting the consumption basket of different sets of consumers in urban and rural areas. An appropriate inflation indicator should (i) reflect price changes of constituent items accurately and (ii) provide some understanding of headline inflation.