Decomposition of Weekly Whole Sale Price Indices

Controlling inflation has been a central issue on the government agenda during 1992-93, as the price rise in 1991-92 generated considerable concern. In light of this, an attempt to explain the behaviour of prices and its projection for future periods attains greater significance. In this paper we have made an attempt to quantify the various components associated with the movements of prices viz., trend, and seasonal factors and residual elements (other than trend and seasonal factors). This exercise reveals that during 1991-92, it was the residual component which kept prices above the trend level. An attempt to project the WPI during 1992-93 at the overall level on a weekly basis has also been made here. It may be noted that this is primarily a statistical exercise and needs to be complemented by analysis of specific factors associated with the movement of residuals component. This analysis may thus be considered as a preliminary basis for more detailed studies of price behaviour.