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

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...

WEALTH TAX

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 WEALTH TAX   WHAT CONSTITUTES WEALTH? For wealth tax purposes, "wealth" means property , urban land, car, jewellery , yacht, boat, aircraft and cash in hand in excess of Rs 50,000. CAUTION POINT | Do not think you will have an easy escape from wealth tax by transferring your `wealth' without consideration to your spouse or minor child. Such assets will also be considered as your wealth. HOW TO DETERMINE YOUR TAXABLE WEALTH Add the taxable value of the above assets (computed as per the detailed rules for valuation) owned by you as on March 31 (for FY 2014-15, it will be March 31, 2015). In case you sold your car during the year, it will not be taxable wealth. Deduct loans if any obtained by you to acquire any of the taxable assets from the value of gross tax out for at least 300 days in a...

Equity Savings Fund

Invest Equity Savings Fund Online   The best part about these funds is that they are subject to equity fund taxation and at the same time are structured like MIP like funds . This new category, equity savings funds , offer a little of everything. They allocate money to equities & equity related instruments, and fixed income. They aim to generate returns by diversification. Such funds invest in fixed income and arbitrage to protect the investors from short term volatility and equity for capital gains. The best part of these funds is that they are subject to equity fund taxation and at the same time are structured like MIP funds.   MIP funds however are subject to debt fund taxation. Investors Equity savings funds are suitable for the following: First time investors who seek partial exposure to equity with less volatility and greater stability Investors seeking moderate capital appreciation with relatively lower risk Those wh...

How to Pick Top Performing Mutual Fund Schemes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   How to Pick Performing Schemes  Funds that continue to stay in the top grade of performance over longer periods are the ones to bet on, advise investment experts   The mutual fund performance charts of the past few months make for an impressive reading. Funds across all categories boast of stellar returns. Sample this: The mid and small cap category has averaged 77 percent return over the past 12 months, with the best fund delivering a staggering 120 percent. The tax-saving funds also average an impressive 51 percent, including a fund which has soared 92 percent. Many of the table-toppers are funds of proven quality and track record. However, there are also schemes that are not that well-known. Some of these have rarely made it to the performance charts in the past, yet, of late, they bo...

8% Government of India Bonds quick guide

For those seeking comfort in safety of returns, the Government of India issued 8% savings bond once again comes to the fore. First launched in 2003, these bonds are issued by the government with a maturity of 6 years. The bonds are available at all times with specified distributors through whom you can apply to invest in them. Here is a quick guide to what the bond offers and its features to ascertain to check for suitability. What are Government of India bonds Government of India bonds are like any other government bonds with specified rate of interest. The rate is fixed at 8% per annum paid half yearly, or you can opt for cumulative payment of interest at the end of the tenure. You can buy these bonds from State Bank of India and its associates, other nationalized banks and some private sector banks such as HDFC Bank Ltd and ICICI Bank Ltd, among others. The bonds can be bought from the offices of Stock Holding Corporation of India as well. They are available in physical form onl...
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