The finance ministry has proposed that services should be included in the widely tracked wholesale price-based inflation index to reflect true picture of price changes in the economy.

"Inclusion of service in the inflation index would give a true picture of inflation in India," the finance ministry said in a draft paper circulated to departments concerned and industry associations for comments by senior economic advisor H A C Prasad.

In India, the Wholesale Price Index does not include services.

However, two major Consumer Price Indices (for industrial workers and for urban non-manual employees) include services like medical care, education, recreation and amusement and transport and communication, according to the paper titled "Strategy for India's Services Sector: Broad Contours".

But, major services like trade, hotels, transport and communication, financing, insurance, real estate and business services do not find place in either WPI or consumer price indices.

Citing example of America, the draft paper said the contribution of services to GDP of the US is around 73 per cent, the consumer price index for all urban consumer gives 59.9 per cent weigthage for services.

Services sector in India accounted for 54 per cent of GDP in 2005-06. However, if construction is considered as services as done by the Reserve Bank of India, this share will increase to 60.7 per cent, the paper said.

Analysts said WPI inflation, which has reached close to the upper threshold of RBI's projection of 5-5.5 per cent for this fiscal might show some moderation as services prices have a tendency to decline over a period.

Wholesale price based inflation series that was revised in April 2000 (base 1993-94 prices) has 435 items for which there are 1918 quotations.

As many as 136 distinctly new items were added to the basket of the revised series, while 150 items were dropped from the existing series.

Thus, 68 per cent of the items/commodities remained common in the earlier and revised series.

Some of the important items that enter the WPI commodities basket for the first time are electricity for Railway traction, purified terephthalic acid, injection moulded plastic items, oxygen gas in cylinder, and Railway sleepers (cement product).

Some of the dropped items are mica, imported petroleum crude, indigenous petroleum crude, khadi, handloom cloth, broad gauge open wagons, and wrist watches.

On broader level, primary articles have a weight of 22.02 per cent in WPI, fuel, power, light and lubricants 14.23 per cent and manufactured products carry the highest weight of 63.75 per cent.