Currently, Service Sector accounts for around 60% of the India's economy but these data are hardly getting reflected in Wholesale Price Index (WPI) or Consumer Price Index (CPI), which take care of price increase at retail level. According to a Parliamentary Panel, the existing Indices doesn't capture price rise in the Service Sector such as healthcare, education, banking, Insurance, transport and communication. Therefore, panel has asked Government to come up with a Service Sector Price Index, which will be captured in the Inflation data so as to make it holistic one.
Since Service Sector accounts substantially to the Gross Domestic Product (GDP) of Indian economy, it is crucial to get precise data on Service inflation for understanding inter-sectoral trade terms and the relative sector price movements. The healthcare, entertainment, hospitality, transport and Insurance are mostly privatized where costs may be rising exorbitantly than being captured in the Inflation Indices. In the interest of consumers, the better data on prices, production and quality of services would facilitate regulators to act accordingly.
The Department of Industrial Policy and Promotion (DIPP) has been working on developing a Service Sector Price Index for more than a year, which faced issues on the consistency of data. The issues seem to be settling down as Government has announced launching Business Services Price Index from next month. It would be pertinent to mention RBI had shifted from WPI to CPI, a few years back, for determining its monitory policy stance as WPI doesn't capture services in its basket. However, the increasing prices in entertainment, transportation, education, healthcare and BFSI sectors are not fully captured even in CPI. Hence, the need for Services Price Index.
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