A BENCHMARK FOR INFLATION

Presented By:-

Parampal singh500901037Shaweta Wadhawan500801518Shray Jali 500901062Vivek Raina 500901068

WHOLESALE PRICE INDEX

The price of a representative basket of wholesale goods

Central measure of inflation

Focuses on the price of goods traded between corporations

Released weekly on every Thursday and influences stock and fixed price markets

Price movement of each commodity individually determines the WPI through the averaging principle.

WHOLESALE PRICE INDEX

The wholesale price index comprises of the following indices:

Domestic Wholesale Price Index (DWPI)

Export Price Index (EPI)

Import Price Index (IPI)

Overall Wholesale Price Index (OWPI)

ORIGIN & HISTORY

The Office of the Economic Adviser to the Government of India published for the first time WPI with base week ended August 19, 1939, from the week commencing January 10, 1942

Index was calculated as the GM of the price relatives of 23 commodities

These commodities were classified into four groups• Food & Tobacco• Agricultural commodities• Raw materials• Manufactured articles

Each item was assigned equal weight

There was a single price quotation for each item

SITUATION UPTO FY 2009-2010

1st April, 2000

Weights are assigned on the basis of the entire wholesale transactions

The base year was 1993-94

Three broad sectors namely, • Primary Articles

• Fuel, Power, Light and Lubricants

• Manufactured Products

COMPARATIVE STUDY

Source: http://eaindustry.nic.in/pib.htm

SETTING UP OF WPI

Finalization of the base year

Finalization of the item basket

Finalizing Classification structure

Allocation of weights at major groups/ sub groups

Finalization of item specification and sources of collection

Collection of price

Calculation of index

FIXING THE BASE YEAR

Base Price index= 100

Changes not before 5 years and not after 10 years

Previous base years were 1970-71, 1981-82, 1993-94

Criterion Normal year with no abnormalities in trade and

production, without any political disturbances, wars, natural calamities

Data should be available for that year Year should be as recent as possible Comparable with other data series in national

and state level

CLASSIFICATION

Allocation of weights is done based on the traded value of the item

But for agricultural commodities it is difficult to obtain the traded value so marketed value(MV) is used

MV= Marketed Surplus Ratio(MSR) X Value of Production (VoP)

VoP depends on quantity of production and an average price of commodity

MSR is ratio of marketed quantity and quantity of production

WEIGHTS ASSIGNMENT

CALCULATION OF WPI Laspeyres Formula (relative method): It is given by

the formula as :

Ten-Day Price Index:

Calculation Method:

Methods for linking a new series with an old one

i) Arithmetic conversion method

ii) Ratio method

iii) Regression method

The office of the Economic Adviser uses the arithmetic conversion method

The linking factor for the all commodities index is 2.478 for conversion of indices from the base 1993-94 series to the earlier base 1981-82.

LINKING FACTOR

TREND OVER THE YEARS

Current Situation of

Wholesale Price Index

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HOW TO CALCULATE INFLATION

The formula for calculating the Inflation Rate

(B - A) * 100 A

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PROBLEMS WITH WPI

Wholesale markets for products like cars may not exist

WPI doesn’t take the price of services into consideration

Some commodities may have higher weights during a particular period and may not be consumed during other