Wholesale price index

The Wholesale Price Index (WPI) was first published in 1902, and was one of the more economic indicators available to policy makers until it was replaced by the producer price index (PPI) in 1978.

Wholesale price index: This is the index that is used to measure the change in the average price level of goods traded in wholesale market. A total of 435 commodities data on price level is tracked. The Wholesale Price Index (WPI) is the most widely used price index in India. It is the only general index capturing price movements in a comprehensive way. It is an indicator of movement in prices of commodities in all trade and transactions. It is also the price index which is available on a weekly basis with the shortest possible time lag only two weeks. It is due to these attributes that it is widely used in business and industry circles and in Government, and is generally taken as an indicator of the rate of inflation in the economy. It is imperative that the index is put on as sound a footing as possible.

This is the reason why recently the government is considering moving towards a monthly producer price index from weekly wholesale price index. Government internationally use this kind of index, new index with base year 2000-01, will include new weights and extended coverage of items also the deliberations are on to put a producer price index that will include a few services as well to make it truly representative of the changing nature of the economy services like rail transportation, road transportation, telecom and banking are being brought under the umbrella of the new index. Reserve bank of India uses a wide variety of general instruments of credit control to keep the inflation under control like cash reserve ratio, statutory liquidity ratio and open market operations. Recently government increased the cash reserve ratio in two stages to curb the rise of inflation. To individuals also a variety of instruments are available which hedge the inflation risk like various inflation indexed bonds.