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Services may be included in WPI

By Devika Banerji in New Delhi
June 30, 2009 12:38 IST
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The ministry of statistics and programme implementation is planning to include services in the wholesale price index to increase the scope and coverage of the index, said India's Chief Statistician Pronab Sen.

The services sector contributes the highest of around 54 per cent to the country's gross domestic product. At present, the WPI, which is released every week, contains prices of primary articles, fuel and manufactured products.

An expert group in the statistics ministry is exploring services that would constitute the basket. Data from banking and transport services would be the first sectors to be covered on an experimental basis.

The plan is to initially build a separate services index, which would be integrated into the WPI later.

"Defining and categorising services in various sectors is a difficult task, but we have started with some financial and transport-related services and will gradually try to identify all the services that will constitute the basket," said Sen.

The chief difficulty lies in the fact that it is difficult to make a distinction between wholesale and retail prices in many financial services. Also, services offered by financial firms are specialised, making it difficult to compare the prices.

Economists have expressed doubts about this move, saying the consumer price index would be more suited to capture the sector.

"The problem with services sector is manifold and services like hotels and even financial services operate more at the consumer level rather than at the producer's level which the WPI seeks to capture," said Sumita Kale, economist with research firm Indicus Analytics, adding, "However, logistics and transport services will be easier to capture and incorporate."

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Devika Banerji in New Delhi
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