(IGP) Special Current Affairs Material for IAS (Pre) 2013 - PIB "Topic : Revised Series Of Wholesale Price Index (BASE 2004-05=100) To Reflect Better Price Trends"

(IGP) Special Current Affairs Material for IAS (Pre) 2013

Chapter: Gist of Press Information Bureau Articles

Topic: Revised Series Of Wholesale Price Index (BASE 2004-05=100) To Reflect Better Price Trends

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.

Q. What is the importance of WPI?

  • 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. 

Q. What was the reason behind changing base year of WPI?

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 Ministry for Commerce & Industry.

Q. What are the main features of new 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 changes were made on the basis of the recommendations of the Working Group headed by Professor Abhijit Sen, Member, Planning Commission.

  • 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.

  • 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 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,

  • 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  
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

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