More weight for manufacturing in new WPI system: report

India's new wholesale price index, set to debut in September, will give a slightly higher weight to manufactured products, raising chances of elevated readings to continue for the next few months.

The new index seeks to reflect a more contemporary consumption behaviour, and will cut the weight of primary products a tad, a senior official from the commerce and industry ministry told Dow Jones Newswires on condition of anonymity.

India is grappling with high inflation that was initially driven by food prices but is now spilling over into manufactured goods, and this will keep the central bank under pressure to tighten policy rates through the year.

"The weight will depend upon the trade value of these items as taken out from the 2007 National Accounts data," the official said. The headline inflation reading for August will be based on the new index and will be announced mid-September, he added.

In the current index that has 1993-94 as the base year, the weight of manufactured products is 63.75 per cent and primary articles 22.02 per cent. The new index will have the fiscal year through March 2005 as the base year and will comprise 676 products, compared with 435 in the current index.

Analysts said manufactured goods have traditionally shown higher inflation in India and the move to give them a higher representation in the index could push up the inflation reading.