Wholesale price index

The Wholesale Price Index (WPI) is the price of a representative basket of wholesale goods. Some countries ( like the Philippines) use WPI changes as a central measure of inflation.But now India has adopted new CPI to measure inflation. However, United States now report a producer price index instead.

The Wholesale Price Index or WPI is "the price of a representative basket of wholesale goods". Some countries use the changes in this index to measure inflation in their economies, in particular India – The Indian WPI figure was released weekly on every Thursday . But since 2009 it has been made monthly. It also influences stock and fixed price markets. The Wholesale Price Index focuses on the price of goods traded between corporations, rather than goods bought by consumers, which is measured by the Consumer Price Index. The purpose of the WPI is to monitor price movements that reflect supply and demand in industry, manufacturing and construction. This helps in analyzing both macroeconomic and microeconomic conditions.

Calculation

The wholesale price index (WPI) is based on the wholesale price of a few relevant commodities of over 240 commodities available. The commodities chosen for the calculation are based on their importance in the region and the point of time the WPI is employed. For example in India about 435 items were used for calculating the WPI in base year 1993-94 while the advanced base year 2004-05 uses 676 items.[1] The indicator tracks the price movement of each commodity individually. Based on this individual movement, the WPI is determined through the averaging principle. The following methods are used to compute the WPI:

Laspeyres Formula 
It is the weighted arithmetic mean based on the fixed value-based weights for the base period.

Ten-Day Price Index

Under this method, “sample prices” with high intra-month fluctuations are selected and surveyed every ten days through phone. Utilizing the data retrieved by this procedure and with the assumption that other non-surveyed “sample prices” remain unchanged, a “ten-day price index” is compiled and released.

Calculation Method

Monthly price indexes are compiled by calculating the simple arithmetic mean of three ten-day “sample prices” in the month.

Ten-Day Price Index

Under this method, “sample prices” with high intra-month fluctuations are selected and surveyed every ten days through phone. Utilizing the data retrieved by this procedure and with the assumption that other non-surveyed “sample prices” remain unchanged, a “ten-day price index” is compiled and released. Calculation Method Monthly price indexes are compiled by calculating the simple arithmetic mean of three ten-day “sample prices” in the month.

See also

References

  1. ↑ "Govt plans to revise WPI base year to 2010-11". business standard. PTI. July 24, 2011. Retrieved 13 June 2014.


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