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.