The Indian government is setting up a committee to update how it measures inflation at the factory level. This measurement is called the Wholesale Price Index (WPI). They want to make it more accurate because the Indian economy has changed a lot since the last update.
Here's a simple explanation:
What is the WPI? It's a way to measure how prices of goods change before they reach consumers (at the wholesale level).
Why update it? The current WPI is based on data from 2011-12. This is outdated because the economy has changed a lot since then. For example, the WPI only looks at goods, not services, which are a big part of India's economy.
What's the plan? The government is forming an 18-member committee to advise on changing the base year to 2022-23. This means they will use prices from 2022-23 as a starting point for measuring future price changes. They also want to move towards using a broader measure called the Producer Price Index (PPI).
What's the PPI? Unlike the WPI, the PPI includes both goods and services, giving a more complete picture of inflation.
Who's on the committee? The committee has 18 experts in economics and finance.
What are the expected benefits?
More accurate GDP: A better way to measure how the economy is really growing after taking inflation into account.
Better understanding of inflation: A clearer picture of how prices are changing, which helps the government make better economic policies.
Other key points:
The last WPI update was in 2015.
The committee has 18 months to give its report.
The current WPI doesn't include services or international trade.
In simple terms: The government is changing how it measures factory-level inflation to make it more accurate and up-to-date. They're doing this by updating the base year for the WPI and moving towards a new measure called the PPI that includes both goods and services. This will help them better understand the economy and make better decisions.