The Government’s Initiative to Revamp the Wholesale Price Index
New Delhi: In a significant move to enhance economic measurements, the Indian government has announced the formation of a committee of experts aimed at changing the base year of the Wholesale Price Index (WPI) to 2022-23. This initiative seeks to improve the accuracy of factory-gate inflation assessments and, consequently, the estimation of economic output adjusted for inflation.
Expert Committee Details
The 18-member committee, led by NITI Aayog member Ramesh Chand, will evaluate the proposal to update the base year from 2011-12 to 2022-23. This change is designed to reflect the structural transformations within the Indian economy over recent years.
Transitioning to a Producer Price Index
In a bid to create a more comprehensive economic measure, the government is also considering the transition from WPI to a Producer Price Index (PPI), which would encompass services—an essential segment representing over half of India’s economic output.
Closer to Reality
Updating the WPI base year promises to yield more accurate estimations of price changes at the producer level, enhancing the GDP deflator calculations. This shift is anticipated to provide a more realistic picture of India’s real GDP, effectively adjusting for price changes.
Expert Opinions and Future Prospects
Experts, including DK Srivastava from EY India, have applauded the government’s initiative, emphasizing the need for a PPI that excludes indirect tax impacts on producers. The committee will have 18 months to deliver its report, reviewing existing price collection systems and suggesting enhancements to improve the reliability of WPI and PPI.
As this initiative unfolds, it stands to not only modernize India’s economic indicators but also place the nation in line with international national income accounting practices.
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