In the previous article we discussed about what is Inflation. Now we would like to cover how inflation is calculated in India. India uses Wholesale Price Index (WPI) to calculate inflation.
Wholesale Price Index measures the average of the changes of goods and services price on the basis of wholesale price. Presently 435 commodities price level is being tracked through whole sale price index in India. It is also the price index which is available on a weekly basis with the shortest possible time lag of only two weeks. India considers 1993-94 financial year as base year for present WPI index calculation.
The 435 commodities are divided into different groups & sub groups. The list of 435 commodities can be found here. Each commodity has some weightage in the WPI index. Below are the weightages of commodities group wise:1. Primary Articles (weightage: 22.02525%)
2. Fuel, Power, Light & Lubricants (weightage: 14.22624%)
3. Manufactured Products (weightage: 63.74851%)
The primary articles group consists of following sub groups: Food articles, non food articles and minerals.
The ‘Manufactured Products’ group consists of following sub groups: Food Products, Beverages, Tobacco & Tobacco Products, Textiles, Wood & Wood Products, Paper & Paper Products, Leather & Leather Products, Rubber & Plastic Products, Chemicals & Chemical Products, and Non-Metallic Mineral Products, Basic Metals. Alloys & Metals Products, Machinery & Machine Tools, Transport Equipments &Parts, Other Misc. Manufacturing Industries.
The weightage of each group/subgroup of commodities in WPI can be found here. There is another method for claculation of inflation, it is ‘Consumer Price Index (CPI)’ . Presently most of the developed countries including US, UK & Japan are using CPI method.
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{ 9 comments… read them below or add one }
i wanna know whether electronics such as laptops, mobile and other luxury goods are considered while calculating inflation or not?
Right now computer sector,Mobile Area are not part of commodities which we were using for calculation of Inflation eventhough it contributes a lot to GDP.
Hi
I must say you guys are doing a great job. Making our life easier…Phew!!
I have a question
Acouple of months before Telecom Commission recommended a Uniform Licence Fee (ULF) of 8 per cent of A
What exactly is AGR and why ULF is calculated as a percent of AGR at the first place??
Hi
I must say you guys are doing a great job. Making our life easier…Phew!!
I have a question
A couple of months before Telecom Commission recommended a Uniform Licence Fee (ULF) of 8 per cent of Adjusted Gross Revenue (AGR)
What exactly is AGR and why is ULF calculated as a percent of AGR at the first place??
Please make a separate link/tab for posting a new (not yet discussed) question/thread.
Since Aug-2010,
WPI is calculated based on 676 commodities with base year as 2004-05
and the new weightages are -
PRIMARY ARTICLES (Weight 20.12%)
MANUFACTURED PRODUCTS (Weight 64.97%)
FUEL & POWER (Weight 14.91%)
Recently Food Inflation fell to its Lowest Level in Six Years
An article read
“The fall is likely to prompt the RBI to cut interest rates at its policy review…”
Y would RBI cut interest rate to check fall in food inflation??
Correct me if I am wrong- Is it because by doing so, more money would be pumped in the economy- that because now people would park less money in the bank . And thus more money chasing a fixed product would increase the prices.
Hi Arya,
The new IIP details were detailed out at the below link. Thanks for the suggestion. That’s a good idea. We will have separate page for topic suggestions. Rate cut also brings down companies borrowing cost and hence acts as a stimulus for industrial output growth.
http://lastbull.com/what-is-iip-new-iip-in-india-what-is-new/
hi Sathish,
Thanks for the reply.
There was one more question-in my first post- viz:
A couple of months before Telecom Commission recommended a Uniform Licence Fee (ULF) of 8 per cent of Adjusted Gross Revenue (AGR)
What exactly is AGR and why is ULF calculated as a percent of AGR at the first place??
Could you please throw some light on it?