Before products are sold at retail, their entire price is tracked by a wholesale pricing index (WPI). This includes the costs imposed by wholesalers and, frequently outside of the country, manufacturers. The Wholesale Price Index WPI is a measure of inflation that is often presented as a percentage change from a previous month or year.
Since agricultural marketing is a State matter, the APMC Agricultural Produce Market Committee is a mechanism that works under the State Government. It has Yards/Mandis in the market area that manages the recognized agricultural produce and livestock.
The purpose of the APMC was to prevent farmers from making distressed sales as a result of being coerced and exploited by creditors and other middlemen.
Let us get an understanding of the consumer price index and wholesale price index.
Importance of Wholesale Price Index (WPI)
- Prices change throughout time in a dynamic world.
- The Wholesale Price Index (WPI) movement is used to compute the inflation rate, which is a crucial indicator of how quickly prices are changing.
- WPI is widely used by the government, banks, industry, and business circles because it accurately tracks price fluctuations.
- WPI adjustments are frequently associated with significant monetary and fiscal policy shifts.
- Similar to this, the Government of India bases its trade, budgetary, and other economic policies in part on the movement of the WPI.
- Additionally, escalation clauses in the supply of equipment, construction work, and raw materials are used as a result of the WPI index.
- Numerous nominal macroeconomic indicators, such as Gross Domestic Product, are deflated using the WPI (GDP).
Wholesale Price Index (WPI) in India
The Consumer Price Index (CPI) and WPI are typically used to calculate inflation rates. In India, the Ministry of Commerce and Industry’s WPI serves as the basis for calculating inflation rates. The CPI is a metric that evaluates the weighted average of prices for a variety of household purchases, including food, transportation, and health care. India had its highest inflation rate, which was 34.68 percent. In the next year, the rate dropped to -11.31 percent.
Shortcomings in the APMC System
The Monopoly of APMC
Monopolies in any industry, whether they are held by the government, an MNC firm, or an APMC, are harmful (with a few notable exceptions). Farmers are deprived of superior clients and original suppliers, as well as consumers.
These markets have extremely high license prices. Farmers are frequently prohibited from participating in markets. Additionally, in addition to the license cost, the rent and value of the stores are relatively high, which discourages competition. APMC is typically exclusively used by a few members of the rural or metropolitan elite.
It happens frequently that agents in an APMC band together to form a cartel and purposefully refrain from placing greater bids. Produce is bought at a price that was artificially discovered and then sold for more. Spoils are then shared by participants, leaving farmers in the lurch.
High marketing fees, commissions, and APMC
Cess must be paid by farmers, which drives up expenses. In addition to this, the value-added tax is imposed by many states.
The APMC functions as a market and a regulator. As a result, its ability to act as a regulator is compromised by its financial stake in the lucrative industry. Despite being ineffective, they won’t relinquish any control. Members and the chairman are typically chosen/elected from among the agents present in that market.
Agents frequently withhold a portion of the payment for bogus or unclear justifications. The farmer is occasionally denied a payment slip, which is necessary for him to obtain a loan and recognize sale and payment.