The government has revamped the Wholesale Price Index (WPI) system from August. An announcement to this effect was made by Anand Sharma, Union Minister of Commerce & Industry at a press conference in New Delhi today. In the new series, the inflation stood at 8.5% for August. The overall inflation for August was 9.5% as per the old series (base year 1993-94).

Mr. Sharma informed that the new WPI series has been prepared by shifting the base year from 1993-94 to 2004-05. Moreover, the new series would include commodities for the calculation of WPI. While 400 odd products are added to the goods basket, about 200 outdated items are dropped from it. Added products include gold, silver, refrigerators, computers, television, VCD, dish antenna, washing machine, microwave oven, mineral water, readymade food and crude petroleum. The inclusion of new items that are widely used by middle-class would help in tracking the changing consumption pattern.

“It (the new series) will help in informing both the government and people how the prices are moving. This will give a robust picture and reflect actual price movement,” Mr. Sharma said.

Finance Minister Pranab Mukherjee remained optimistic when he said, “Inflationary pressure is still there because food prices have gone up because of the erratic monsoon, but I do hope annualized inflation would be much lower in the new series.”

“The change in base would improve the accuracy and make the index less prone to fluctuations,” said TCA Anant, chief statistician of India. He added, “The commodity basket will be analyzed every quarter, even though the groups will remain fixed.”

The new WPI series is based on the recommendations of a working group headed by Abhijit Sen, member, Planning Commission.

The surging economy has turned the tide for Indian households – the number of high-income households exceeded that of low-income by the end of 2009-10, according to a study conducted by the Centre for Macro Consumer Research (CMCR), a division of the National Council of Applied Economic Research’s (NCAER). The study report titled ‘How India Earns Spends and Saves’ is based on a survey of 4.4 lakh households across 24 states carried out by the National Survey of Household Income and Expenditure (NSHIE) in 2004- 05.

The report pegs the number of low-income households (less than Rs 40,000 annual income) at 41 million, while that of the high-income (more than Rs 1.8 lakh annual income) at 46.7 million. The rest, earning between Rs 40,000 and Rs 1.8 lakh, comes under the middle-income category, numbering 140.7 million.

This means that 62% of Indian households come under the middle-income group. The influence of the middle-class was highlighted by the report when it pointed out, “Their growing clout becomes even more apparent when one looks at the ownership patterns of households goods. Nearly 49 per cent of all cars are owned by the middle class, compared to just 7 per cent by the rich.” The Indian middle-classes are the proud owners of 53% of air-conditioners and 46% credit cards sold in the country.

“The wheel of fortune continues to spin in India, with each level of household income set to move a notch higher by the end of the decade,” the report observes on the rising incomes.

Another fact revealed by the study report is that the country’s young workforce is the driving force behind the surging economy as well as the changes witnessed in the income patterns. This sizeable (25%) wage-earning population from the age group of 26 to 35 years forms the chief earners in 68% households and accounts for 61% of income earned in the country.

A survey by consultancy firm Nielson unveils the positive wave that is sweeping the country. Indians top the list of global citizens who are optimistic about their job prospects and personal finances in the coming 12 months. The Nielsen Global Consumer Confidence Report has an overwhelming 92% Indians thinking that they would land their dream jobs within the year.

The report also reveals the fact that 71% Indians believe that this is a ‘good’ time to buy, while 14% consider that this is an ‘excellent’ time for purchases. India stands first in the consumer confidence index for the current quarter, April-June 2010. While India amassed 129 points (a two point increase from last survey), the second position is occupied by Indonesia and Vietnam with 119 points each.

India and Indians should thank the healthy growth the country’s economy witnessed, despite the recessive times. Piyush Mathur, president, the Nielsen Company India said, “The positive attitude of Indians comes on the back of a robust GDP growth (9 per cent) in the April-June quarter of 2010. For the fiscal 2009-10, India’s economy grew by 7.4 per cent due to higher-than-anticipated growth in the agriculture, mining and manufacturing sectors.”

The Nielson survey to gauge confidence, concerns and spending patterns of people worldwide is based on the answers given by 27,000 internet users spread over 48 countries. Indians scored the most on all parameters – job prospects, personal finances and spending outlook.

Rising food prices feature among the top concerns for Indians, while job anxieties and financial worries are relegated to the background. Terrorism, children’s education, parental welfare and global warming also are bothering Indians.

After releasing the discussion paper on Direct Tax Code (DTC) in August 2009 for public feedback, a revised version of the same was released by the government on Tuesday. The revised DTC has covered some of the issues in the original that attracted widespread criticism.

The new Direct Tax Code is expected to change the income tax calculation of corporate as well as individual assessees. The discussion paper says, “The indicative tax slabs and tax rates and monetary limits for exemption and deductions proposed in the direct tax code will be calibrated while finalizing the legislation.” This may lead to higher tax rates than that proposed in the original draft. However, for individual assessees, the retention of exemption on savings and home loans has brought cheers.

Due to public outcry, the government has amended the DTC to the effect that withdrawals from pension funds, provident funds and life insurance schemes will not be taxed. However, there are still some points that lack clarity. The DTC paper says, “approved pure life insurance products and annuity schemes will also be subject to EEE (exempt, exempt, exempt) method of tax treatment’. This leaves the fate of unit-linked insurance plans (ULIPs) in doubt.

The new wealth tax will cover financial assets such as stocks and mutual funds as well. This is bound to be tougher for individuals. The dividing line between long-term and short-term investment is blurring with the new DTC proposal. With no great distinction between capital gains tax for both, investors will lack the motivation to go in for long-term investments, which is against government policy.

The DTC bill is slated to come up in Parliament in the coming monsoon session. The DTC will come into effect from April 2011 and will replace the Income Tax Act of 1961.