WHY INDIA USES WPI?
The Consumer Price Index (CPI) is produced by the U.S. Department of Labor's Bureau of Labor Statistics (BLS). It is the most widely used measure of U.S. inflation rate and to determine the real gross domestic product . Wholesale Price Index (WPI) was first published in 1902, and was one of the economic indicators available to policy makers until it was replaced by most developed countries by the Consumer Price Index in the 1970s. In India, a total of 676 commodities data on price level is checked through WPI . This is an indicator of movement in prices of commodities for all trade and transactions. Consumer Price Index (CPI) in India comprises multiple series classified based on different economic groups. There are four series, for the CPI UNME (Urban Non-Manual Employee), CPI AL (Agricultural Laborer), CPI RL (Rural Laborer) and CPI IW (Industrial Worker). While the CPI UNME series is published by the Central Statistical Organization, the others are published by the Department of Labor India CPI is calculated on monthly basis whereas, WPI calculated on weekly basis is. The Indian government has taken WPI as an indicator of the rate of inflation in the economy. Why is India not switching over to the CPI method of calculating the inflation rate ? Finance ministry officials point out that there are many problems in shifting from WPI to CPI . First of all, in India, there are four different types of CPI indices, and that makes switching over to the Index from WPI would be risky. Secondly, officials say the CPI cannot be used in India because there is too much of a lag in reporting CPI numbers. In fact, as of May 21, the latest CPI number reported is for March 2006. The WPI is published on a weekly basis and the CPI, on a monthly basis. And in India, inflation is calculated on a weekly basis
problem with WPI calculation is that more than 100 out of the 637 commodities included in the Index are now considered to be unimportant from the...
Please join StudyMode to read the full document