Nepal Rastra Bank revises WPI calculation method

Kathmandu, September 23

Nepal Rastra Bank (NRB) has revised the commodity basket, industrial classification and weightage for scientific calculation of the Wholesale Price Index (WPI). The new commodity basket, classification and weightage have been determined as per the international practices, according to the central bank.

The central regulatory and monetary authority will calculate WPI based on the new method from this fiscal, according to Nara Bahadur Thapa, executive director of NRB. The central bank started calculating WPI since fiscal 1999-2000. The base year will now be changed from 1999-2000 to 2017-18.

The central bank has prepared the new commodity basket, weightage and industrial classification based on the wholesale price survey of 24 markets in the country namely,  Kathmandu, Lalitpur, Bhaktapur, Kavre, Morang, Sunsari, Jhapa, Ilam, Dhanusha, Siraha, Rupandehi, Kaski, Nawalparasi, Chitwan, Kailali, Banke, Dang, Bardiya, Kanchanpur, Doti, Surkhet, Bara, Parsa and Makawanpur.

The central bank has expanded the commodity basket, which will now comprise 262 goods from the earlier 72 commodities. Broadly, the commodity basket has been categorised into three segments — consumption goods, capital goods and intermediate goods. Earlier, WPI was gauged based on the three major classifications of commodity basket namely, agricultural commodities, domestic manufactured commodities and imported commodities.

The central bank has changed the classification by selecting the commodities that can have an impact on inflation. The WPI is calculated so as to develop awareness of the pass-through effect in the consumer price inflation and efficiency of the supply chain in the country. As WPI is considered as the de facto producer price index, WPI and its sub-indices can be used as gross domestic product deflator. The price escalation clause in the contracts can be based on the WPI index.

Weightage of the primary goods in WPI has been minimised to 33.59 per cent out of 100 per cent compared to 39.02 per cent in the earlier method. Similarly, weightage of fuel and power in WPI has been raised to 8.76 per cent from 5.29 per cent. Likewise, weightage of manufacturing commodities has been increased from the earlier 55.69 per cent to 57.65 per cent, as per the central bank.

During the wholesale price survey the surveyors had collected the data of commodities whose market price is volatile like fruits, vegetables, fish and chicken meat on a fortnightly basis and of cereals and other basic commodities every month. The surveyors had also collected data of other commodities whose price was more or less stable in every quarter in the last fiscal to develop the new wholesale price index. The central bank has also developed the construction material price index as a separate sub-index to gauge the wholesale price inflation of the construction materials.

Source: NRB

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