Skip to main content

New Wholesale Price Index (WPI) Index

 

 

 

Last month the government revised the wholesale price index (WPI), making it more broad-based and representative of inflation in the present context. The new index will cover 676 items compared to 435 earlier. The number of price quotations that will be used for producing the index has been increased from 2,000 to 5,500. The base year has also been changed from 1993-94 to 2004-05. The immediate impact of this revision was a drop in the August inflation figure from 9.5 per cent (according to the old index) to 8.5 per cent.

 

Change in product basket


The new index will now measure price changes in 241 more items than the earlier index, which measured price changes in 435 items. Of the 435 items, the government has retained only 259 and added 417 new items (62 per cent) to the new index.

 

The index comprises three product categories - primary articles, fuel and manufactured products. The manufactured products category has seen the maximum revamp with 169 items from the earlier basket being dropped and 406 new ones being added. While the fuel basket remains unchanged, the primary articles category has seen seven items being dropped and 11 new ones being added.

 

Items such as ready-made food, computer stationery, dish antennas, ice cream, condensed milk, soft drinks and VCDs have been added, while some items such as TV sets (B&W), scooters, plastic items, printing items and fireworks have been dropped or revised. "Seasonal items now do not show up in the WPI once they disappear from the market, and their weights are redistributed across the WPI. Thus, these factors may exacerbate seasonality in the new series," says Tushar Poddar, economist at Goldman Sachs. According to Jay Shankar, chief economist and vice-president, Religare Capital Markets, the new index is more in line with people's current consumption patterns. "Many items such as alarm clocks that were used in the early nineties are no longer used today. Similarly many new items such as mobile phones that are used today were not in existence earlier. Therefore, to make the index more relevant to today's context, there was a need to overhaul it," he says.

 

Weightage revised


In the new index, the weightage of manufactured products is 65 per cent (up from 63.8 per cent in the earlier index), of primary articles is 20.1 per cent (down from 22 per cent) and that of fuels is 14.9 per cent (up from 14.2 per cent). The drop in August inflation figure can be attributed to the drop in weightage of food articles in the revised index. In the new index, food articles have been assigned a weightage of 14.3 per cent, down from 15.4 per cent earlier.

 

The number of price quotations to be used has been increased from 1,981 to 5,482. Says Jay Shankar: "The more quotations you have, the better and more accurate the inflation numbers become."

 

In India, WPI is the most closely tracked inflation index. Being most commonly quoted in the media, it influences both public perception of how high inflation is and policymakers' decision making (particularly monetary policy). As the decades go by, people's consumption patterns change. The WPI then must undergo periodic makeovers to make it more representative and contemporary. This is what the new index should hopefully achieve.

 

New WPI - Weights and Items

 

 

 Weight

 

 

  

 Number of Items

 

 

 

 

 

 

 

 

 

 

 

 2004-05

 

 1993-94

 

 2004-05

 

 1993-94

 

 Common

 

 Dropped/ Revised

 

 New Items

 

PrimaryArticles

 

20.1

 

22.0

 

102

 

98

 

91

 

7

 

11

 

FuelIndex

 

14.9

 

14.2

 

19

 

19

 

19

 

0

 

0

 

ManufacturedProducts

 

65.0

 

63.8

 

555

 

318

 

149

 

169

 

406

 

AllCommodities

 

100.0

 

100.0

 

676

 

435

 

259

 

176

 

417

 

Source: Office of the Economic Advisor

 

Popular posts from this blog

Rs 14,000 Crore worth of tax free bonds coming soon from NHAI , PFC

  NHAI, PFC file prospectuses, coupon rate not yet decided MORE debt investment options have opened up for investors with AAA rated tax-free bonds worth over Rs 14,000 crore lined up. The National Highway Authority of India ( NHAI ) and Power Finance Corporation ( PFC ) are offering Rs 10,000 crore and Rs 4,033.13 crore worth of tax-free bonds, respectively, as per prospectuses filed with the Securities and Exchange Board of India (Sebi). Of a Rs 5,000 crore issue by PFC, Rs 966.87 crore has already been raised through private placement on September 28 and November 1. Tax-free bonds give investors tax-free return on any amount invested. In another kind of bonds, the long-term infrastructure bonds, investments up to Rs 20,000 are tax exempt, that is this cap amount can be deducted from the taxable income. Accordingly, the NHAI prospectus has clarified that only the amount of interest from -and not the actual investment on -its new bonds will be tax-free. "NHAI's publ...

Change in Fund Manager for some of HSBC Mutual Fund Schemes

Buy Gold Mutual Funds Invest Mutual Funds Online Download Mutual Fund Application Forms Call 0 94 8300 8300 (India) However, this facility is only available to Unit holders who have been assigned a folio number by the AMC.   HSBC Mutual Fund has announced that the below mentioned schemes shall be managed by the new fund managers as stated in the table. The effective date will be July 02, 2012.   Amaresh Mishra 's will be Vice President and Assistant Fund Manager. Having done a Post graduate diploma in Business Management and Bachelor of Chemical Engineering, he has over seven years of experience in Equities and Sales.   Mr. Piyush Harlalka's designation shall be Vice President- Fixed Income. Qualified as a C.A., C.S. and holding M.B.A.( Finance degree), he has over six years of experience in Fund management and ...

How EEE and EET Tax affect Retirement Investments

  An important factor while choosing a financial product is its taxation , and for retirement savings, this is even more important as the sums involved are usually life-long savings. Here's a look at the current tax treatment of three major long-term retirement planning products, which are - Employees' Provident Fund (EPF), Public Provident Fund (PPF) and National Pension System (NPS). EPF The tax treatment is EEE, which means your money is exempt from taxes at the time of investment, accumulation and withdrawal. At the time of investment, the tax deduction is under the limit of section 80C of the Income-tax Act , which is currently Rs 1.5 lakh. Partial withdrawals are also tax-free if made after 5 years of continuous service. If withdrawals are made before 5 years of service, 10% tax will be deducted at source. Exceptions have also been provided for transfer of amount and conditions wherein the subscriber is unemployed for more than 2 months or the loss of job was beyond th...

Personal Finance: You can insure your wedding

But luck may not always be on your side. With the frequency of such attacks, as also other risks and unforeseen accidents growing, a wedding insurance is something you may want to look at if a marriage is being planned in the family. Event insurance plans like this is still in its nascent stages due to low awareness. And given the sacred nature of the ritual, nobody wants to discuss or think negative. But as wedding spends and risks grow, it makes sense to cover the potential monetary loss. The policy in those countries even covers the loss of the wedding ring, the wedding gown not reaching on time and even the expenses/loss due to late or non-appearance of the photographer which may mean staging the event once again for the photograph. In India, most insurance companies — including ICICI Lombard General Insurance, Oriental Insurance, Bajaj Allianz and National Insurance — offer wedding insurance. The policy is tailor made to individual requirements and needs. The sum insur...

DSP BlackRock MidCap Fund

Best SIP Funds Online   HOW HAS DSP BlackRock Small & Mid Cap Fund PERFORMED? With a 10-year return of 14.61%, the fund has outperformed both the category average (12.34%) and the benchmark (10%) by a good margin. Should you invest in DSP BlackRock Small & Mid Cap Fund? This fund invests predominantly in mid-cap stocks but takes a sizeable exposure in small-caps as well. The focus is on nascent companies with high growth potential. The fund manager places emphasis on quality and avoids inferior businesses even if these look tempting from a valuation perspective. Over the past year, the fund portfolio has grown, having added to some of the underperforming sectors like chemicals and healthcare. Its portfolio churn has come down significantly. The heavily diversified portfolio is run completely agnostic of its benchmark index— most bets are from outside the index—which can at times lead to bouts of underperformance as seen in the recent years....
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now