Wholesale price Index

By: Gunaseelan

Wholesale price index is an economic indictor available to the policy makers. This was invented in 1902 and was later on replaced by product price index. Generally it is referred as WPI.

This is an economic indicator which is used to tell and measure the changes in the average price level of goods traded at wholesale market or price at big sale. WPI is an indicator to follow the growth of economy in general, and as material in analyzing the market and the monitory conditions.

WPI is a widely used price indicator in many countries. It lists hundreds of items an help poly makers to make economic related decisions. Hundreds of commodities data on price level is tracked. This is a very comprehensive data. It is one of the best indexes for capturing price movements in a comprehensive way. Wholesale price index is an index that depicts the moving prices of commodities in all trade and transactions.

There are a lot of advantages of using WPI, First of all it is very comprehensive, and gives a lot of information of what’s happening to the general prices of the commodities, secondly that is widely available every where and thirdly it is updated on weekly bases with the shortest possible time lag of two weeks. These are the attributes that make it popular all through the industries, organizations, businesses and government sector. WPI is also generally taken as indicator of the rate of inflation in the economy.

For economist it is good way to tell there bosses what’s happening outside there organization or business. In this modern age it is not possible for a business to survive under such competitive environment and high inflation rates. WPI and other similar indictors give them a handy tool to measure the prices of commodities on which their business depend directly or indirectly, hence benefiting their own self and their organization and businesses.

Now, WPI has used a new base year namely 2000 (2000=100). WPI with 2000 as base year begin to be calculated since April 2006. And after that time, we don't calculated WPI with base year 1993 anymore.

Wholesale price indices are calculated by collecting data from central cities, provinces, states of capitals of provinces or states. Now you must be thinking that why only major cities or capitals are selected for measuring these indices. That is because it is assumed that these major cities and capital reside major companies and businesses.

Respondents are selected from different companies. They may represent companies that are related to different businesses and in this way the prices of all the commodities are taken. Hence all the industries are covered.

WPI is divided into different groups, representing different industries and businesses. Mostly WPI is divided into a few very common groups, for example Agriculture, Manufacturing, Mining and Quarrying, Imports and Exports, where each sector consists of sub commodity groups. Each commodity group in turn contains many commodities. Through this way all the commodities are covered from all the sectors and the average prices of all the commodities are calculated at a central place.

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