Revision of Wholesale Price Index by Department of Industrial Policy and Promotion

Revision of Wholesale Price Index Department of Industrial Policy and Promotion 12th May 2017 0

Wholesale Price Index Measure of average change in wholesale price . First published from the week commencing 10th January 1942 (Base year 1939). WPI has been revised with base years 1952-53, 1961-62, 1970-71, 1981- 82, 1993-94, 2004-05. Current series of WPI (Base 2004-05) was launched on September 2010 Seventh revision is with base year 2011-12 synchronized with base year of other important indicators such as GDP, IIP etc New series based on the recommendation of the Working Group chaired by Late Dr. Saumitra Chaudhari. 1

Key Concepts 1. Definition of Wholesale price Price for bulk sale at the first stage of transaction Existing formula (WPI Base 2004-05) = Basic Price (ex factory price, ex mine price or mandi price) + Excise Duty- Trade discount New Formula (WPI Base 2011-12)= Basic price -Trade Discount New WPI is not influenced by fiscal policy 2. Weighting Structure Shows relative importance of an item in a basket based on its availability in the Indian economy as reflected by Net traded value Net traded value = Gross Value of Output + Import Export 3. Methodology Compilation of item level indices based on Geometric Mean 2

Comparative Statement of Weights, Number of Items & Number of Quotations Major Group/ Group No. of Quotations Weights No. of Items 2004-05 2011-12 2004-05 2011-12 2004-05 2011-12 ALL 100 100 676 697 5482 8331 COMMODITIES PRIMARY ARTICLES 20.118 102 117 22.62 579 983 FUEL&POWER 14.910 19 16 13.15 72 442 MANUFACTURED PRODUCTS 64.972 555 564 64.23 4831 6906 3

WPI with new base year 2011-12 Item basket consist of 697 items (against 676 in existing base) with following changes No. of items (weight) 85.78 Common 498 14.22 New 199 11.97 Dropped 146 Deletion and addition of items is based on their relative importance in the commodity basket 4

Salient features of the new series of WPI Product Basket Primary Articles A. Food Articles Prices of seasonal fruits and vegetables now available for longer period 7 new fruits and 9 new vegetables added New fruits added include Mosambi (Sweet Orange), Pomengranate, Amla, Jackfruit, Pear Almond, and Walnut. New vegetables added include Radish, Carrot, Cucumber, Pointed gourd, Bitter gourd, Bottle gourd, Beans, Pumpkin and Drumstick. B. Minerals Newminerals added : Copper Concentrate, Lead Concentrate, and Garnet Minerals removed : Copper Ore, Graphite, Fireclay, Magnesite , Gypsum, Kaolin, Dolomite, Barytes and Steatite C. Crude Petroleum and Natural Gas Natural Gas added because of its increasing importance 5

Salient features of the new series of WPI Fuel & Power A. Trifurcation of Non coking coal (Based on Gross Calorific Value) Non-Coking Coal G1 to G6 [GCV exceeding 5500 Kcal/kg.] Non-Coking Coal G7 to G14 [GCV 3100 Kcal/kg. to 5500 Kcal/kg.] Non-Coking Coal G15 to G17 [GCV < 3100 Kcal/kg.] Coke deleted from sub group Coal of Fuel and Power because of its decreasing importance Coal B. Mineral Oils Petroleum coke introduced because of its increasing importance Light Diesel Oil (LDO) dropped because of its decreasing importance C. 1 item group for Electricity sector Electricity Monthly average rate of sale of power of 49 generating stations from Central, state and private sector covering Hydro and Thermal is used To reflect the price change at bulk transaction level 6

Salient features of the new series of WPI Manufactured Products New series (2011-12), 22 two digit groups based on NIC classification (2008) Selection of items from the Annual Survey of Industries (ASI) data by covering at least 80 percent of the output of each 2 digit group. 2011-12 2004-05 Food Products Beverages Tobacco Products Textiles Wearing Apparel Leather and related products Wood and products of wood and cork Paper and Paper products Printing and Reproduction of Recorded media Chemical and Chemical Products Pharmaceuticals, Medicinal, Chemical and Botanical Products Rubber and Plastic Products Other Non Metallic Mineral Products Basic Metals Fabricated Metal Products, Except Machinery and Equipment Computer, Electronic and Optical products Electrical Equipment Machinery and Equipment Motor Vehicles, Trailers and Semi Trailers Other Transport Equipment Furniture Other Manufacturing Food Products 1 2 3 4 5 6 7 8 9 Beverages, Tobacco and Tobacco Products Textiles Leather and Leather Products Wood and Wood Products Paper and Paper Products 10 Chemical and Chemical Products 11 12 13 14 Rubber and Plastic Products Non metallic mineral Products Basic Metals, Alloys and Metal Products 15 16 17 18 19 20 21 22 Machinery and Machine Tools Transport Equipment and Parts 7

New features WPI Food Index Anew WPI Food index to be compiled on a monthly basis to estimate the WPI based inflation in food items This index is estimated by taking the aggregate of WPI for Food Products (9.12) and Food Articles (15.26) The total weight of WPI Food Index will be 24.38 Effective monitoring of food inflation at wholesale level 8

New features High Level Technical Review Committee has been set up Committee to review periodically the list of products in the item basket of WPI to keep pace with the dynamic changes in the economy Committee to suggest methodology for inclusion of new and important items in and exclusion of outdated items from the existing basket as and when warranted. Committee is to be headed by Secretary, DIPP. Other Members of the Committee are Secretary MoSPI, Chief Economic Adviser, MoF and Principal Adviser DIPP. 9

Data Sources (1 of 2) I. Primary Articles Directorate of Economics and Statistics, and National Horticulture Board, M/o Agriculture and Farmers Welfare Tea Board & Coffee Board, Department of Commerce Directorate of Sugar and Vanaspati, Department of Food, Ministry of Consumer Affairs East India Cotton Association, Mumbai Textile Commissioner, Mumbai Central Silk Board, Bengaluru National Dairy Development Board, Rubber Board, Kottayam Indian Bureau of Mines, Nagpur Ministry of Petroleum & Natural Gas Gas Authority of India Ltd 10

Data Sources (2 of 2) II. Fuel & Power Coal India Ltd, Ministry of Coal Bharat Petroleum Corporation Ltd Hindustan Petroleum Corporation Ltd Indian Oil Corporation Ltd Mangalore Refinery and Petrochemical Ltd. Central Electricity Authority III. Manufactured Products (No. of factories increased from 3744 to 5788) Different Private and Public sector units producing respective goods taken from the Annual Survey of Industries frame. Directorate of Economics and Statistics (DES), Ministry of Agriculture & Farmers Welfare Textiles Commissioner Joint Plant Committee, Ministry of Steel 11

Annual Growth Rates (%)- WPI Major Groups Base 2011-12 vis- -vis 2004-05 Commodity Groups Base Year Weights (%) 2012-13 2013-14 2014-15 2015-16 2016-17 2011-12 100 6.9 5.2 1.2 -3.7 1.7 All commodities 2004-05 100 7.4 6.0 2.0 -2.5 3.7 2011-12 22.618 11.4 9.9 2.2 -0.4 3.5 Primary Articles 2004-05 20.118 9.8 9.8 3.0 0.3 4.7 2011-12 13.152 7.1 7.1 -6.1 -19.7 -0.1 Fuel & Power 2004-05 14.910 10.4 10.1 -0.9 -11.6 5.6 2011-12 64.231 5.3 3.0 2.5 -1.8 1.4 Manufactured Products 2004-05 64.972 5.4 3.0 2.4 -1.1 2.6 12

Comparison of Inflation Rates (%)- All Commodities 10.0 8.0 6.0 4.0 Inflation rate (%) 2.0 0.0 -2.0 -4.0 -6.0 -8.0 Mar 17 Oct 12 Oct 13 Oct 14 Oct 15 Oct 16 Feb 13 Feb 14 Feb 15 Feb 16 Feb 17 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Apr 12 Apr 13 Apr 14 Apr 15 Apr 16 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Aug 12 Aug 13 Aug 14 Aug 15 Aug 16 Inflation (2011-12) Inflation (2004-05) 13

Comparison of Inflation Rates (%)-Primary Articles 20.0 15.0 10.0 Inflation rate (%) 5.0 0.0 -5.0 -10.0 Oct 12 Oct 13 Oct 14 Oct 15 Oct 16 Feb 13 Feb 14 Feb 15 Feb 16 Feb 17 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Apr 12 Apr 13 Apr 14 Apr 15 Apr 16 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Aug 12 Aug 13 Aug 14 Aug 15 Aug 16 Mar 17 Inflation (2011-12) Inflation (2004-05) 14

Comparison of Inflation Rates (%)- Fuel & Power 30.0 20.0 10.0 Inflation rate (%) 0.0 -10.0 -20.0 -30.0 Mar 17 Oct 13 Oct 14 Oct 15 Oct 16 Oct 12 Feb 13 Feb 14 Feb 15 Feb 16 Feb 17 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Aug 15 Aug 12 Aug 13 Aug 14 Aug 16 Apr 12 Apr 13 Apr 14 Apr 15 Apr 16 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Inflation (2011-12) Inflation (2004-05) 15

Comparison of Inflation Rates (%)- Manufactured Products 8.0 6.0 4.0 Inflation rate (%) 2.0 0.0 -2.0 -4.0 Mar 17 Feb 13 Oct 12 Oct 13 Oct 14 Oct 15 Oct 16 Dec 14 Feb 14 Feb 15 Feb 16 Feb 17 Dec 12 Dec 13 Dec 15 Dec 16 Apr 12 Apr 13 Apr 14 Apr 15 Apr 16 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Aug 12 Aug 13 Aug 14 Aug 15 Aug 16 Inflation (2011-12) Inflation (2004-05) 16

Comparison of Food Inflation (%)- (Food Articles and Food Products) 16.0 14.0 12.0 10.0 Inflation rate (%) 8.0 6.0 4.0 2.0 0.0 -2.0 -4.0 Oct 12 Oct 13 Oct 14 Oct 15 Oct 16 Dec 15 Feb 13 Feb 14 Feb 15 Feb 16 Feb 17 Dec 12 Dec 13 Dec 14 Dec 16 Aug 12 Apr 12 Apr 13 Apr 14 Apr 15 Apr 16 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Aug 13 Aug 14 Aug 15 Aug 16 Mar 17 Inflation (2011-12) Inflation (2004-05) 17

Trend in overall inflation rate Lower inflation rates in new base year on account of: Shifting of base year to a more recent period Inclusion of new items and exclusion of old ones Updation of specifications Increase in number of source agencies for reporting data and exclusion of closed ones 18

Trend in Fuel and Power inflation rate Overall decline in weight of Fuel and Power Petroleum Coke added Light Diesel Oil deleted Steady increase in Excise duty for mineral oils from 2015 onwards is not taken into account in the WPI (2011-12) Electricity prices in 2011-12 series capture price for bulk sale by measuring average rate of sale of power by power producers to distributors (in 2004-05 series power tariffs applicable to Domestic, Commercial, Agricultural, Railway and Industry was considered) 19

Trend in Manufactured Products inflation rate New item basket reflecting the changed structure of the economy 135 items have been dropped, and 173 new items added The 391 common items have different weights in 2011-12 series compared to 2004-05 series New factories have been selected from recent Annual Survey of Industries Specifications of items relate to more recent varieties 20

The following material is available on the website of Office of Economic Advisor at http://eaindustry.nic.in/ Press Release for new series of WPI (Base 2011-12) Press Release of the provisional index for April 2017 Monthly WPI (Base 2011-12) from April 2012 till April 2017 Linking factor for linking WPI (Base 2011-12) with WPI (Base 2004-05) 21

Thank You 22