New Delhi, April 30: Even as the government continues the war against its biggest ‘immediate challenge’ of inflation, the wholesale price index (WPI) is set for a complete overhaul. Along with a change in its composition, the WPI will soon be measured monthly, instead of weekly, in line with the frequency followed in many developed nations.

The government is awaiting the first price reports on manufactured products to kick off a test run of the new revised index, which may come into force by the year-end. The WPI is currently measured every week to track the wholesale price movements of commodities in all trades and transactions. The changes in the index are based on the deliberations of an expert committee headed by Planning Commission member Abhijit Sen.

While the present index is based on a 1993-94 data series introduced in April 2000, the new series will have a base year price of 2004-05. To capture the structural changes in the economy in recent years, the new WPI will cover 980 commodities against 435 now, and include more manufactured products. The number of price quotations collected for the products will go up from 1,918 to 6,000.

WPI-based annual rate of inflation is the change in the inflation rate during a week over the same week in the previous year. It does not, however, reflect the differences in prices in a week over the week gone by.

In order to enable the comparison of prices from one week to the next, the government plans to make public the actual prices of all commodities, including sensitive items, from next month. This would be a weekly exercise and released along with the WPI numbers. This weekly price disclosure initiative will continue even after the WPI moves to a monthly format.

Eventually, the government plans to shift to a producer price index (PPI) from the WPI, by capturing price movements at the producers’ level. The PPI is expected to include a price index of services as well.

PPI measures both input prices paid by producers for production and the output price that they receive on produced items. It is aimed at measuring inflation of finished goods and avoiding multiple counting of raw materials at different stages.