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Current Affairs

Ramesh Chand Working Group to revise WPI

Date: 28 June 2019 Tags: Basics of Economics

Union Ministry of Commerce & Industry has constituted 18 member Working Group for the revision of the current series of Wholesale Price Index (Base 2011-12). Ramesh Chand (Member, NITI Aayog) will be chairman of the Working Group. Office of Economic Adviser, Department for Promotion of Industry & Internal Trade (DPIIT) will be the nodal office for the Working Group and will process its report and recommendation for further necessary action.

Terms of Reference of the Working Group are:

  • Select most appropriate Base Year for preparation of new official series of Index Numbers of Wholesale Price (WPI) and Producer Price Index (PPI) in India.
  • Review commodity basket of current series of WPI and suggest additions or deletions of commodities in the light of structural changes in the economy witnessed since 2011-12.
  • Review existing system of price collection in particular for manufacturing sector and suggest changes for improvement.
  • Decide on computational methodology to be adopted for monthly WPI/PPI. It may also recommend roadmap for switch over from WPI to PPI.
  • Examine existing methodology of compilation of PPI approved by Technical Advisory Committee on Series of Prices and Cost of Living and suggest further improvement in compilation and presentation.
  • Examine method of computing linking factor adopted so far and suggest appropriate change in method of computing linking factor, if necessary.
  • Suggest any other improvements as may be necessary for enhancing reliability of official series of WPI / PPI.

About Whoseale Price Index (WPI)

  • It is also known as the headline inflation rate (in India). It measures average change in the prices of commodities for bulk sale at level of early stage of transactions.
  • Its basket covers commodities falling under three major groups namely Primary Articles, Fuel and Power and Manufactured products. (The index basket of the present 2011-12 series has total of 697 items including 564 items for Manufactured Products, 117 items for Primary Articles and 16 items for Fuel & Power).  WPI basket does not cover services.
  • WPI prices tracked are ex-factory price for manufactured products, mandi price for agricultural commodities and ex-mines prices for minerals. Weights given to each commodity covered in WPI basket is based on value of production adjusted for net imports.
  • Office of Economic Advisor (OEA), Department for Promotion of Industry & Internal Trade (DPIIT), Union Ministry of Commerce and Industry calculates the WPI.
  • The main uses of WPI are: (i) Provide estimates of inflation at wholesale transaction level for the economy as a whole. This helps in timely intervention by the Government to check inflation in particular, in essential commodities, before the price increase spill over to retail prices. (ii) It is used as deflator for many sectors of the economy including for estimating GDP by Central Statistical Organisation (CSO). (iii) It is also used for indexation by users in business contracts. (iv) Global investors also track WPI as one of the key macro indicators for their investment decisions.

Need of revision of WPI

The current series of WPI with base year 2011-12 was introduced in May 2017.  Since 2011-12 base year, Indian econmy has seen significant structural changes. Therefore, it has become necessary to examine coverage of commodities, their weightages and related issues pertaining to existing series of index numbers of WPI.