Wholesale Price Index (10.09.09)
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WHOLESALE PRICE INDEX AND INFLATION
Introduction Price Index It is a normalized average of prices for a given class of goods or services in a given region, during a given interval of time Wholesale Price Index It is the price of a representative basket of wholesale goods.
Brief History Firstly After In
used in Great Britain in 1886
this it was used in US in 1893
INDIA it was used in 1942 for the first time
Inflation
Inflation rate is the rate at which prices of goods and services increase in its economy. Since it's practically impossible to find out the average change in prices of all the goods and services traded in an economy due to the sheer number of goods and services present, a sample set or a basket of goods and services is used to get an indicative figure of the change in prices, which we call the inflation rate. If P0 is the current average price level and P − 1 is the price level a year ago, the rate of inflation during the year might be measured as follows: Inflation Rate= P0
P-1/P-1 X 100%
Types Of Inflation There are basically two main types of Inflation:
Cost-push Inflation Example: The oil crisis of the 1970s, wherein price increases of a key imported constituent impacted the prices of goods across industries.
Demand pull Inflation
Inflation
Reasons for selection of WPI as a measure of There are many methods to calculate inflation like CPI(Consumer Price Index), COLI(Cost Of Living Indices), PPI(Producer Price Index) etc, but WPI is used because of the following characteristics:
Reasons for selection of WPI as a measure of
WPI uses a sample set of 435 commodities for inflation calculation The price from wholesale market is taken for the calculation WPI is available for every week It has a time lag of two weeks, which means WPI of the week two weeks back will be available now. WPI is often seen as a comfortable tool to take measure against price rise by the policy makers as it gives direction before the commodity actually hits the market
Inflation & WPI
Inflation & WPI Inflation (%) 14 12 10 8 6 4 2 0 7/5/2008 8/5/2008
9/5/2008 10/5/200 11/5/200 12/5/200 8 8 8
1/5/2009 2/5/2009 3/5/2009
4/5/2009 5/5/2009
9/05/2009
04/04/2009
28/02/2009
24/01/2009
20/12/2008
15/11/2008
11/10/2008
6/09/2008
2/08/2008
28/06/2008
24/05/2008
19/04/2008
15/03/2008
9/2/2008
5/1/2008
Inflation & WPI All Commodity
250
240
230
220
210
220 9/05/2009
04/04/2009
28/02/2009
24/01/2009
20/12/2008
15/11/2008
11/10/2008
6/09/2008
2/08/2008
28/06/2008
24/05/2008
19/04/2008
15/03/2008
9/2/2008
5/1/2008
Inflation & WPI Primary Articles
260
255
250
245
240
235
230
225
9/05/2009
04/04/2009
28/02/2009
24/01/2009
20/12/2008
15/11/2008
11/10/2008
6/09/2008
2/08/2008
28/06/2008
24/05/2008
19/04/2008
15/03/2008
9/2/2008
5/1/2008
Inflation & WPI 385
Fuel, Power, etc
375
365
355
345
335
325
315
Items Of WPI
Items Included in WPI There are 435 items included in the WPI. ○ Out of these 435 items, ‘primary articles’ (food items and non-food items like jute etc) contributes 98 items, “fuel, power, light and lubricants” 19 items and “manufactured products” 318 items. Primary article has assigned a weight of 22.02 per cent, fuel, power, light and lubricants has been given weight of 14.23 per cent while manufactured products has been give a weight of highest 63.75 per cent.
Items Included in WPI
Calculation of WPI Wholesale price index aggregation method is based on Laspeyres formula as below: I= S (Ii x Wi) / S Wi
Where, I = Index numbers of wholesaleprices of a subgroup/group/ major group/all commodities
S = represents the summation operation, Ii = Index of the ith item / sub- group/ group/ major group. Wi = Weight assigned to the ith item of subgroup/group/ major group.
Problems & Suggestions Measuring B.P. using thermometer. Erroneous method of calculating inflation. Very old base Not for mango man (aam aadmi) Practically useless / sooo outdated Have Saridon , Campa cola,Pagers,Dalda Coco cola, Crocin, Refined oil, Mobiles are missing PPI also includes taxes and transport charges Service sector no share
Consumer Price Index Four different types of C.P.I. In India. Also covers poorest section of society It shows what consumers are paying Less closely tracked than W.P.I. Less no. of items included Released monthly not weekly Too much lag in reporting it every month
Consumer Price Index Views
of N.S.C.
Views
of Economists
Views
of Mr. Finance minister
Ignorance
of people
Urgent Action IS Needed
Pradeep Vikas Pradeep Manish Manish
Introduction Price Index It is a normalized average of prices for a given class of goods or services in a given region, during a given interval of time Wholesale Price Index It is the price of a representative basket of wholesale goods.
Brief History Firstly After In
used in Great Britain in 1886
this it was used in US in 1893
INDIA it was used in 1942 for the first time
Inflation
Inflation rate is the rate at which prices of goods and services increase in its economy. Since it's practically impossible to find out the average change in prices of all the goods and services traded in an economy due to the sheer number of goods and services present, a sample set or a basket of goods and services is used to get an indicative figure of the change in prices, which we call the inflation rate. If P0 is the current average price level and P − 1 is the price level a year ago, the rate of inflation during the year might be measured as follows: Inflation Rate= P0
P-1/P-1 X 100%
Types Of Inflation There are basically two main types of Inflation:
Cost-push Inflation Example: The oil crisis of the 1970s, wherein price increases of a key imported constituent impacted the prices of goods across industries.
Demand pull Inflation
Inflation
Reasons for selection of WPI as a measure of There are many methods to calculate inflation like CPI(Consumer Price Index), COLI(Cost Of Living Indices), PPI(Producer Price Index) etc, but WPI is used because of the following characteristics:
Reasons for selection of WPI as a measure of
WPI uses a sample set of 435 commodities for inflation calculation The price from wholesale market is taken for the calculation WPI is available for every week It has a time lag of two weeks, which means WPI of the week two weeks back will be available now. WPI is often seen as a comfortable tool to take measure against price rise by the policy makers as it gives direction before the commodity actually hits the market
Inflation & WPI
Inflation & WPI Inflation (%) 14 12 10 8 6 4 2 0 7/5/2008 8/5/2008
9/5/2008 10/5/200 11/5/200 12/5/200 8 8 8
1/5/2009 2/5/2009 3/5/2009
4/5/2009 5/5/2009
9/05/2009
04/04/2009
28/02/2009
24/01/2009
20/12/2008
15/11/2008
11/10/2008
6/09/2008
2/08/2008
28/06/2008
24/05/2008
19/04/2008
15/03/2008
9/2/2008
5/1/2008
Inflation & WPI All Commodity
250
240
230
220
210
220 9/05/2009
04/04/2009
28/02/2009
24/01/2009
20/12/2008
15/11/2008
11/10/2008
6/09/2008
2/08/2008
28/06/2008
24/05/2008
19/04/2008
15/03/2008
9/2/2008
5/1/2008
Inflation & WPI Primary Articles
260
255
250
245
240
235
230
225
9/05/2009
04/04/2009
28/02/2009
24/01/2009
20/12/2008
15/11/2008
11/10/2008
6/09/2008
2/08/2008
28/06/2008
24/05/2008
19/04/2008
15/03/2008
9/2/2008
5/1/2008
Inflation & WPI 385
Fuel, Power, etc
375
365
355
345
335
325
315
Items Of WPI
Items Included in WPI There are 435 items included in the WPI. ○ Out of these 435 items, ‘primary articles’ (food items and non-food items like jute etc) contributes 98 items, “fuel, power, light and lubricants” 19 items and “manufactured products” 318 items. Primary article has assigned a weight of 22.02 per cent, fuel, power, light and lubricants has been given weight of 14.23 per cent while manufactured products has been give a weight of highest 63.75 per cent.
Items Included in WPI
Calculation of WPI Wholesale price index aggregation method is based on Laspeyres formula as below: I= S (Ii x Wi) / S Wi
Where, I = Index numbers of wholesaleprices of a subgroup/group/ major group/all commodities
S = represents the summation operation, Ii = Index of the ith item / sub- group/ group/ major group. Wi = Weight assigned to the ith item of subgroup/group/ major group.
Problems & Suggestions Measuring B.P. using thermometer. Erroneous method of calculating inflation. Very old base Not for mango man (aam aadmi) Practically useless / sooo outdated Have Saridon , Campa cola,Pagers,Dalda Coco cola, Crocin, Refined oil, Mobiles are missing PPI also includes taxes and transport charges Service sector no share
Consumer Price Index Four different types of C.P.I. In India. Also covers poorest section of society It shows what consumers are paying Less closely tracked than W.P.I. Less no. of items included Released monthly not weekly Too much lag in reporting it every month
Consumer Price Index Views
of N.S.C.
Views
of Economists
Views
of Mr. Finance minister
Ignorance
of people
Urgent Action IS Needed
Pradeep Vikas Pradeep Manish Manish
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