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.