Govt planning service price index

The government is planning to set up a service price index (SPI) on the lines of the wholesale price index (WPI) and the consumer price index (CPI) to track the movement of prices in the services sector. The services sector contributes around 55% of the gross domestic product (GDP).

The Department of Industrial Policy and Promotion (DIPP), under the Commerce Ministry, has set up an expert committee headed by C P Chandrashekhar of the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi for working out the index.

"The index will capture the price movements of various services that are rendered to us like insurance, banking, transport and communication. We will decide the weightage of these services in the index during deliberations," a member of the expert committee said.

He also indicated that the price movement in the proposed SPI could be reflected in the rate of inflation. "We will also have to decide if the price change in the various service sector industries would be taken on a weekly or a monthly basis," the member added.

The terms of reference of the committee includes providing guidance, deciding on the scope, coverage and give technical guidance on developing the index.

"The WPI captures price movement in agricultural and manufactured products, but services contribute a major chunk to the GDP. Hence, the proposed SPI will result in better representation of the inflation rate," Abheek Barua, chief economist, ABN Amro Bank said.

According to Barua, the CPI captures some service-related price movements, but it is not enough to represent the entire services sector.