wpi
Post on 19-Oct-2014
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DESCRIPTION
Wholesale Price index-A Measure of InflationTRANSCRIPT
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
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
SNAPSHOT
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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