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Kerala PSC Indian Economy Book Study Materials Page 186Book's First Page
7.22 ndian onom and growth, hampers the growth prospects of the stages can be tracked before it gets built into the middle class in general and the entrepreneurs in finished goods stage.70 Due to its better use many particular while the wage-earners as well as the economies have switched over to the PPI—the poor segment of society feels relieved (at least in oldest such series is maintained by the Bureau short term). of Labor Statistics (BLS) for the US economy— In February 2015, India formally commenced the index is capable of measuring prices at the the process of ‘inflation targeting’. Now, the wholesaler or the producer stage—widely used by new monthly CPI (C), is taken as the measure private business houses in their price targetting.71 of headline inflation and is tracked by the RBI Once India shifts from the WPI to the to anchor its monetary policy and the healthy upcoming PPI, the economy is supposed to have annual range for it is between 2 to 6 per cent. a better idea about the trends of inflation. Meanwhile, the Working Group set up (in ProDucer Price inDex August 2014 under the Chairmanship of B. N. A working group was set up in mid-2003–04 Goldar) by the Government to advise methodology under the chairmanship of Prof. Abhijit Sen, for introducing PPI in the country submitted its Member, Planning Commission to fulfil the twin recommendations in August 2017. The advises of tasks of: the expert committee are under consideration of the Government. (i) revising the current series of WPI (i.e., base 1993–94) and housing Price inDex (ii) recommending a producer price index India’s official Housing Price Index (HPI) was (PPI) for India which could replace the launched in July 2007 in Mumbai. Basically WPI. developed by the Indian home loans regulator, As follow-up to its advices, the new series (base the National Housing Bank (NHB) the index is year) for the WPI has been revised to 2004–05. named NHB Residex. The proposal of switching over to the PPI Currently, it is published for 50 cities on (from the WPI) came up from the government quarterly basis with 2012-13 as base year. Among by mid-2003 and the working group has been 50 cities covered are 18 State/UT capitals and getting inputs from the IMF regarding it. The PPI 37 Smart Cities. NHB is not computing the measures price changes from the perspective of the composite all India housing price index as of now. producer while the consumer price index (CPI) Using population proportion as weights, an all measures it from the consumers’ perspective. India index as weighted average of city indices has Wholesellers charge higher prices to retailers, in been computed in-house—the figure shows that turn retailers charge higher prices to consumers the rate of growth in housing prices at All India and the price increase is translated into the higher level has started to decline from the quarter ending consumer prices—thus the PPI is useful in having December, 2016. It has decreased to around 4 per an idea of the consumer prices in the future.69 In cent in the first quarter of 2017-18 from over 8 PPI, only basic prices are used while taxes, trade per cent in the third quarter of 2016-17. margins and transport costs are excluded. This Meanwhile, the RBI (Reserve Bank of India) index is considered a better measure of inflation began compiling a house price index (HPI) in 2007 as price changes at primary and intermediate 70. Ministry of Finance, Economic Survey 2006–07, p. 92. 69. Stiglitz and Walsh, Economics, p. 517. 71. Samuelson and Nordhaus, Economics, p. 441.