Satya, please include a reference question, i believe you should be asking something related to a research question here, please. the subject is too broad and has a two decade history in india itself. Are you designing one? Are you reviewing one? Are you redesigning WPI? Or if you are considering multiple options..

Dear Amit Sir

I did not pose a question deliberatly, the reason for that is I wanted to have an enquiry about the need of such a SPI and other questions you raised are realy important since I have not precisely stated the motive. I have been studying the methodologies to formulate price indices. And found very urgent need of SPI and the formulation of SPI needs expert interventions. I would appreciate if you could help me by rendering your expert opinion and any sort of help that will ease formulation of SPI. Your comment is well taken. Thanks for your valuable remarks.

I actually like your question and although I do not claim any expertise about the price indices used in India, a general answer might be helpful.  There is a reason we have a variety of price indices; typically, each has a use and often it is specialized.  This implies the range of applicability may be limited and some of the common price indices might be extended beyond their intended applicability (e.g., the CPIu in the US).

When it comes to GDP, we usually use deflators (i.e., price indices) specific to each category in order to obtain a more accurate rendition of any change that took place in both real and nominal terms.  In theory, this should allow us to assess real GDP in a superior manner.  

The interesting question to me is how much should these be generalized.  The level of detail is nothing short of amazing. For example, we have separate indices for each grade of gasoline, jet fuel, coal and many others in the energy sector that may be interesting to a wider audience.  However, we can find a category of products where only a specialized few may be interested; consider,"Paper bag and coated and treated paper manufacturing."  The price indices of this broader category have been 101.9, 102.0, and 102.1 in September 2014, December 2014, and January 2015 respectively.   An even more detailed subset in this category would be "Uncoated paper and multiwall bags" had price indices of 171.3, 171.3, and 171.4 over the same time span. Obviously, there is considerable divergence in what happens over time and even if few really care, the important point is that we can determine more accurately what is happening with both prices and quantities in an economy.  

The relative weightings depend on a variety of factors and these weightings will be different for different applications. For example, it makes a difference if we are just focused on consumers; if we our focus is broader in something like GDP, they the price index will have different weights. If this is not confusing, then explore price indices for imports and exports and realize both flow into GDP.  If one is not careful, it will seem like the weights should approach zero as a country approaches a balance of trade.

From my perspective, these price indices allow us to decipher what is happening in detail and in general depending on which price index we use. Although they could be improved, it is extremely unlikely for a single price index to reveal everything we wish to know. Instead, we have plenty of information about prices if we are willing to dig a bit deeper than the general public.   

I know this is a long answer.  When I first considered a similar question quite some time ago, it helped to look at it this way. We have had some interesting discussions around here as to the merits of different indices and inflation in general. My math colleagues bring an interesting perspective.  I hope it helps you.

Dear Rob

I appreciate your efforts to have your ideas on SPI and price index in general. I agree with your concern and also believe that there is need of further dig in this area of study.  It is the quick say to your reply. Very soon I will further have discussion with you. Thank you.