Mumbai, July 5 (IANS): The data on industrial output and inflation is flawed as it does not reflect the correct picture and could "potentially mislead policy calculations", Reserve Bank of India (RBI) Governor Duvvuri Subbarao said Tuesday.

"The Index of Industrial Production (IIP) has shown counter-intuitive trends," Subbarao said while referring to recent unusual fluctuations in the industrial output data.

The RBI governor pointed out that, according to the then available IIP series, IIP growth was positive during the period of global economic crisis -- December 2008 to June 2009.

"This was contrary to our assessment of the underlying trend of some deceleration on account of the crisis. The new IIP series, revised with 2004-05 as the base, now shows that IIP growth was, in fact, negative during that period vindicating our intuition," he said.

"Again, the old IIP series indicated that industrial activity slowed in the second half of 2010-11 relative to the first half but the revised IIP series shows that industrial growth maintained roughly the same pace between the two halves of the fiscal year," the RBI governor said, adding that the poor quality of data "could potentially mislead policy calculations".

The government last month changed the base year of the IIP data calculation to 2004-05 from the old calculation base of 1993-94. Though the updated base has corrected some anomalies, the data still suffers from volatility.

On inflation data, Subbarao said the headline inflation index based on the wholesale prices was also not a true reflection of the impact of price rise on the common people.

"The use of wholesale price index (WPI) as the headline inflation index is flawed as it does not capture the final goods prices that consumers actually experience in the market," he said.

He said the RBI should be guided more by the consumer price index (CPI) which more accurately reflects demand pressures because it is demand pressures that monetary policy action can influence.

The central bank's policy decisions are generally guided by the inflation based on wholesale price index. The wholesale price index (WPI) is based on 2004-05 prices and tracks 555 items.