Headline inflation in India is measured in terms of Wholesale Price Index (WPI) and the Office of the Economic Adviser, Department of Industrial Policy & Promotion is entrusted with the task of releasing this index. WPI is an important statistical indicator, as various policy decisions of the Government, like inflation management, monitoring of prices of essential commodities etc., are based on it. It is one of the key variables for monetary policy changes by the Reserve Bank of India. In addition to its role as a policy variable, WPI is also used by various departments for arriving at the escalation costs of various contracts.
Considering the importance of WPI as a tool for various policy decisions, it is necessary to disseminate the most comprehensive, credible and accurate information, reflecting the realities of the present economic situation of the country. In order to capture the structural changes happening in the economy, the base year of WPI needs to be updated. The Office of the Economic Adviser undertook the work relating to revision of the existing series of WPI (base 1993-94=100), which not only addressed the issue of change in base year, but also revised the entire commodity basket and the weighting diagram so as to better reflect the price trends in economy. The revised series of WPI was officially launched on 14 September, 2010 by the Hon’ble Minister for Commerce & Industry.
Features of the Revised Series of WPI
A representative commodity basket comprising 676 items has been selected in the new series (base 2004-05=100) as against 435 in the old series (base 1993-94=100) and weighting diagram has been derived for the new series consistent with the structure of the economy. There has been a substantial increase in the number of quotations selected for collecting price data for the above items. The number of price quotations for the new series is 5482 whereas in the old series, it was 1918.
The selection of the base year and the commodity basket was made on the basis of the recommendations of the Working Group set up specifically for this purpose. The Working Group was headed by Professor Abhijit Sen, Member, Planning Commission and included as its Members all stake-holders covering the users of the price data and the providers of the prices. The working group in its Technical Reports gave detailed recommendations with regard to the choice of the base year, the method of selection of items, preparation of weighting diagram and the collection of prices. The new index along with the base year and the commodity basket was also examined by Technical Advisory Committee (TAC) on Prices and Cost of Living based in Central Statistical Organisation. Before the launch of the new index, inter-departmental consultations were held and opinions obtained from Economic Advisory Council of the Prime Minister.
A comparative statement of weights, no of items and no of quotations between the old series and new series at Group level is as below:
Major Group / Group|Weight|No. of items|No. of Quotations
Refer Table : See Link :http://pib.nic.in/release/release.asp?relid=69106
2004-05
1993-94
2004-05
1993-94
2004-05
1993-94
All Commodities
100.00
100.00
676
435
5482
1918
I Primary Articles
20.12
22.02
102
98
579
455
II Fuel & Power
14.91
14.23
19
19
72
72
Manufactured Products
64.97
63.75
555
318
4831
1391
Many new items have been included in the new series basket such as flowers, lemon and crude petroleum in Primary Articles and Ice cream, canned meat, palm oil, readymade/instant food powder, mineral water, computer stationary, leather products, scooter / motorcycle tyre, polymers, petrochemical intermediates, granites, marbles, gold and silver, construction machinery, refrigerators, computers, dish antenna, transformer, microwave oven, communication equipments (telephone instruments), TV sets, VCD, washing machine and auto parts in Manufactured Products. A complete list of commodity basket including their weights in the new series of WPI with the base 2004-05 is available on the website www.eaindustry.nic.in.
Comparison Of Rate Of Inflation Between The Two Series
When the new series of WPI was launched on 14th September, 2010 releasing therewith WPI for the month of August, 2010, back series of WPI since 2004-05 was also put in the websiteeaindustry.nic.in. A comparison of rates of inflation between the old series (base year 1993-94) and new series (base year 2004-05) for major groups is:
Refer Table : See Link :http://pib.nic.in/release/release.asp?relid=69106
Revised Series: New Initiatives
There has been a substantial increase, both in terms of the number of commodities and its geographical coverage, in the revised series of WPI (base 2004-05=100), as compared to the earlier revisions undertaken so far. This would, undoubtedly, disseminate the more realistic and reliable data, facilitating better decision making and policy intervention.
The revised series of WPI (base 2004-05=100) has also addressed the issue of flow of regular data. The NIC unit of the Office of the Economic Adviser has developed an online data transmission mechanism, whereby, the manufacturing units can supply price data through internet. Also, an arrangement has been made with National Sample Survey Office (Field Operations Division) to get price data on regular basis. These measures have improved the flow of price data.
The launch of the new series of WPI with base year 2004-05 on September 14, 2010 has been one of the major initiatives of the Ministry of Commerce & Industry, Department of Industrial Policy & Promotion. (PIB Features)
*Senior Economic Adviser, Department of Industrial Policy & Promotion
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