Price Index for Services on the Cards

India will start measuring the price movements in services, such as in banking where a fee or commission is charged, brokerage and wireless telephony to better gauge inflation in the services sector.

The government is working on a Business Service Price Index on the lines of the services producer price index in the US and the European Union, to reflect the price movements of services. This would eventually be merged with the wholesale price index.

In the first phase, the government plans to have separate indices for banking, insurance, securities, telecom, air transport and railways.

“The BSPI could be disseminated separately initially and it will be merged with the WPI once it stabilises. It will add to the robustness of the WPI,” said an official in the know of the plan.

In the second phase, trade and road freight services, hotel (short-term accommodation), storage (warehouse), publishing & broadcasting services (advertisement), information and computer-related services and professional, scientific & technical services are likely to be added to the BSPI.

The official said a combined BSPI might also be explored based on the price indices of these services and their weights as per their value of output in the national accounts statistics.

The government’s move “will widen the data on price movements given the predominance of services in the economic structure of India”, said Aditi Nayar, chief economist, ICRA.

The banking service price index would include direct services for which banks charge a fee or commission, and intermediation services including ‘deposits’ and ‘loans and advances’.

The telecom index would be based on data collected from companies on mobile services, the fastest growing area within the sector.

The basket of port services would contain bulk handling and storage, container handling and storage and breakbulk and storage, as well as vessel-related services like port and docks, pilotage and towage and berth hire. All service price indices would be compiled with 2017-18 as the base year and on a quarterly basis, except for the banking sector which would be monthly as well as quarterly.

The possibility of using this as a deflator in national accounts in place of proxy-deflators is also being considered, the official said.

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