New Delhi, May 13, 2018

New index expected to have new items, which would provide a more realistic picture of price rise and its impact on people

The commerce and industry ministry has started the exercise to revise base year to 2017-18 for computation of wholesale inflation with a view to present more realistic picture of the price situation, a government source said.

In May last year, the government revised the base year for WPI-based inflation to 2011-12 to give a better indication of changes in prices of commodities. The new index, with 2017-18, is expected to have new items, which would provide a more realistic picture of price rise and its impact on people.

Most of the additions could be in the manufactured products category. A working group would be formed to identify the new products which could be added in the index. Currently, the index has a total of 697 items, including primary articles, fuel and power and manufactured products.

The source said that it would take around 24 months to complete the process and come out with the new index with revised base year. Further, the ministry has decided to come out with a Producers Price Index (PPI) next month for 10 services, including telecom and railways on experimental basis.

The move will help track inflation in these services, which will also include ports, postal, insurance, banking, transportation and air travel. Two major indices are used currently for tracking price movement -- Wholesale Price Index (WPI) and Consumer Price Index (CPI).

While the wholesale price index (WPI) measures price movement of goods in wholesale markets, the CPI tracks inflation at retail level and also includes certain services.

While the incidence of taxes are accounted for in WPI and CPI, the PPI would reflect the cost at producers point sans taxes. PPI measures the average change in the price a producer receives for his goods/services sold in the domestic market/exports.

[The Hindu Business Line]