While prices in market remain high, Govt. has revised WPI (Wholesale Price Index ), due to which the inflation has slowed down in August at 8.5% when it is compared to 9.8% in July. This is mainly due to the revised WPI base. Earlier the WPI base was 1993-94. Now the revised base is 2004-2005. This is the fifth revision.
The base revision is done after every 10 years. Revision of base includes change in basket of commodities, assigning new weight to commodities and a shift of the reference year.
Economists across the country have already taken the note of the revised WPI base and altered their inflation projection.
The new index covers 676 items, compared to 435 items covered in the old index. The new index collects more than 5,000 price quotations using 2004-05 as the base year compared to old index which was calculated using 2,000 price quotations. As 2004-05 was the first year of the UPA government, the new index can be said as the UPA price index.
The new index, despite bringing down the prices by 1%, is is widely regarded as an improvement compared to the old one as the consumption pattern has changed since 1993-94, the date of the old index.
The WPI index is normally divided into three groups – primary articles, manufactured products and fuels.
In the new index, items like flowers, lemons and crude petroleum has been added in primary articles group.
In the manufactured group, the new items which are added like ready made products like ice-cream, canned meat, palm oil, readymade/instant food powder and mineral water. The other products which are added are computer stationery, leather products, scooter, motorcycle tyres, polymers, petrochemical intermediates, granites, marbles, gold and silver, construction machinery, refrigerators, computers, dish antennas, transformers, microwave ovens, communication equipment (telephone instruments), TV sets, VCDs, washing machines and auto parts.
The fuels group remains unchanged.