The Wholesale Price Index (WPI) is the most widely used price index in India. It is the only general index capturing price movements in a comprehensive way. It is an indicator of movement in prices of commodities in all trade and transactions. It is also the price index in India which is available on a weekly basis with the shortest possible time lag, i.e., only two weeks. It is due to these attributes that it is widely used in business and industry circles and in Government, and is generally taken as an indicator of the rate of inflation in the economy. It is imperative that the index is put on as sound a footing as possible.

Implicit in the methodology of compiling the index numbers is a certain degree of impairment over time, as the indices with fixed weighting diagram gradually fail to capture the more dynamic segments of the economy as the time passes. Hence all indices have to be revised periodically. Faster the rate of change in the economy more frequent should be the revisions. However this exercise is constrained by the data system in existence.

The current series of Index Number of Wholesale Prices in India with 1981-82 as base year came into existence from July 1989. As would be seen from the revised series contained in this report, several changes have occurred in the weighting diagram and the new index numbers based on the data for the year 1993-94 from those that are currently in use. The decades of Eighties and Nineties have experienced rapid changes in the economic structure of the country in the wake of faster growth, reforms and liberalization. The economy is expected to move at fast pace in future as well. Keeping this in view the Working Group has made a number of recommendations on compilation of WPI, on widening the scope of WPI and introduction of additional indices and on revamping the system of price data collection.

The Working Group was initially constituted in June 1993 under the Chairmanship of Prof. Y. K. Alagh, then Vice-Chancellor of the Jawahar Lal Nehru University. After his induction into Union Council of Ministers the mantle of chairing the Working Group fell on my shoulders from September 1996. Dr. Alagh had already done the spade work which made my task a little easier.

The Working Group constituted five Sub-groups to examine various aspects of the restructuring exercise. As in the past, three Sub-groups were set up comprising of experts in respective fields to report on various aspects of the exercise on (i) selection of agriculture commodities and determination of their marketed surplus ratios, (ii) selection of manufactured products and (iii) identification of items to be included from unorganized manufacturing sector. The Working Group had in addition set up two new Sub-groups to focus attention on important emerging issues. They comprised of experts to report on (iv) analytical and conceptual issue, which seemed pertinent for revision exercises and (v) computerisation of data collection, processing and dissemination of the revised WPI series.

It has taken a fair amount of time to prepare the revised series. The base year weighting diagram could not be prepared until the production data were available for that year. The Working Group had to undertake considerable effort to collect data to make the weighting diagram a meaningful base for the revision exercise; and the task was not at all helped during a phase of transition in which government departments were beginning to lose their status as the repository of decentralised statistics. It was also found that the Working Group was heading towards using the year 1989-90 as the base year of the revised series and that situation seemed to exercise and agonise the mind of the Working Group considerably since much of the revised series would be used only in the new millennium. Fortunately, soon after I took over as Chairman of the Working Group, and with a little bit of effort, it was possible to change the base of the new series to the year 1993-94.

The report has several debts to record. I am particularly grateful to all members of the Working Group for their contributions to the deliberations of the Working Group and the meticulous attention given to whatever was placed for their consideration. In the course of the last six years the Working Group has undergone several changes in its membership. Some Members remained in the Group in their official capacity and others in their individual capacity. It was natural therefore that some changes in membership have occurred over time. The Working Group as originally constituted had twenty-six members which, after changes of various sorts, finally stood at thirty. I am grateful to all the members for their support and contributions.

I must particularly thank Dr. Rakesh Mohan who initiated this whole exercise in his capacity as Economic Adviser, Ministry of Industry. He has continued to retain his interest in the revision and has remained in his personal capacity as a member of the Working Group subsequently. There was a critical loss of time during the period that Dr. Rakesh Mohan relinquished his office to the time Dr. Shravan Nigam took over as Economic Adviser in the Ministry. The Working Group has benefited immensely from the special interest that Dr. Nigam took in concluding this exercise of revision. The Office of the Economic Adviser also functioned as the Secretariat of the Working Group, and it was the sheer hard work and dedication that is required in an exercise such as this and that was contributed by the personnel of the Secretariat, that the revision could take place without any glitches. I must however particularly acknowledge the contributions of Shri B.N. Satpathy, Shri P.L.Rao, Shri Sivasubramaniam, Shri S.M.Mahajan, Shri Raj Kumar, Smt. Rama Mehrotra, Shri Y.C. Sharma, Shri Rajeev Chhabra, Shri Latoor Singh, Shri Sudhir Chandra (NIC) and Ms.Promodita who have all dedicated themselves with considerable competence.

Of the five Sub-groups one each was headed by the Director General, CSO (Sub-group on manufactured items and related matters), Dr.G.S. Ram, (Sub-group on agricultural commodities), Dr.C.S. Prasad, (Sub-group on un-organised/un-registered industries), Dr. Shovan Ray, (Sub-group on analytical issues), and Dr. N. Seshagiri (Sub-group on computerization). I am grateful to the Chairmen of the five Sub-groups for coordinating the work of their respective Sub-groups and producing the Sub-group Reports, which provided the basic material for decisions at various stages of compilation of the new series of indices and for writing the final report.

Dr. Shovan Ray, who as then Member of BICP chaired the Sub-group on Conceptual issues, is one person who has been actively associated with this work from beginning to the end, later as Consultant in the Planning Commission. He was mainly responsible for preparing the draft of the final report. His clear understanding of conceptual issues as also the computational methods has been a great asset in this work. I would like to record my appreciation for Dr. Ray’s contribution.

The processing of the huge volume of the price data and the compilation of the weekly Index Numbers for about 300 weeks would have put perhaps unmanageable pressure on the Secretariat of the Working Group had it not been for the ungrudging support of the National Informatics Centre. I would like to place on record my appreciation of Dr.N.Seshagiri, Director General, National Informatics Centre and Shri V.K.Gupta, and his team of able technical personnel who managed to provide technical support ably throughout this revision exercise.

Several Organisations have made data compilation and revision a less arduous task than could have been encountered in an exercise of this nature. I would particularly like to place on record the assistance received in this regard from the Directorate of Economics and Statistics, Ministry of Agriculture, Central Statistical Organisation, Department of Statistics, Indian Bureau of Mines, Office of the Textile Commissioner, Central Electricity Authority, Department of Coal and the Ministry of Petroleum and Natural Gas. At a critical moment the Secretary, Ministry of Industrial Policy and Promotions, Ministry of Industry extended a helping hand to the Working Group when it was dependent on a set of data before the exercise of finalising the weighting diagram could be secured. This support is deeply appreciated.

An exercise like this could not have been completed without the willing and active support of a very large number of individuals and organization, only some of whom could be named here. I am grateful to all of them.

New Delhi (S.R.Hashim)

November 1999 Chairman