##pi basket can be divided into four commodity groups which have differential behaviour ( chart 1 ). first, food items excluding oilseed products ( weight in wpi : 24. 2 per cent ) : prices of this group of commodities are largely determined by domestic factors and, in the event of supply shortage, imports influences international prices too. second, oilseeds and products ( weight in wpi : 6. 8 per cent ) : this relatively small commodity group has often induced sudden surge in headline wpi as there is a structural shortage and nearly a third of domestic consumption of edible oils is met from imports. third, mineral oils and metals ( weight in wpi : 15. 3 per cent ) : prices of this group of commodities are largely determined by international prices and the volatility in headline wpi inflation in recent years can largely be attributed to fluctuations in the international prices. fourth, other commodities ( weight in wpi : 53. 7 per cent ) : these remaining commodities, largely manufactured products, constitute more than half of the wpi basket and their prices have been more stable than the other three groups. empirical evidence suggests that among the above four groups, there is transmission of prices from mineral oils and metals to the other commodities group within a quarter. the full transmissions of food prices to other commodities takes longer, almost a year. a comparison of domestic and global commodity price movement reveal the following. first, the direction of price movements has been similar, but the overall global commodity price movements have been more volatile, with a pronounced spike in 2007 and 2008 ( chart 2 ). second, the increase in metal prices have been closely followed the global prices. third, domestic prices of petroleum products have been less volatile than the corresponding international prices reflecting administered prices in this group. fourth, increase in domestic milton friedman ( 1963 ) : inflation : causes and consequences, asia publishing house, new york. food prices, excepting the global spike in 2007 and 2008 has been higher reflecting structural and domestic factors ( table 3 ). food prices in india are primarily determined by domestic demand supply factors and domestic price policy. india meets the bulk of its large food demand through domestic production, barring few commodities like edible oils and pulses where the import dependence is about 35 per cent and 15 per cent, respectively. in occasional shortage years, the country has also resorted to imports for wheat and sugar though it is generally an exporter in these commodities ( table 4 ). india ’ s occasional imports of such commodities translate

another distinguished academic and internationally renowned economist, prof. stanley fischer, will be delivering the third brahamananda memorial lecture today. prof. fischer is so well known that it will be presumptuous on my part to introduce him. but i will do so nevertheless if only to pay homage to a tradition. prof. fischer, who is presently governor of the bank of israel, has a formidable reputation as an academic, as a teacher, as an economic policy adviser and administrator, and in his current position, as an economic policy practitioner. his academic credentials are impeccable – phd from the massachusetts institute of technology ( mit ), assistant professor of economics at the university of chicago and professor of economics at mit. you would no doubt have noted that with this blend, prof. fischer will make an ideal referee bis central bankers ’ speeches for the perennial feud between the salt - water and fresh - water economists of the american school. prof. fischer served in several top level institutions in senior positions. he was vice president, development economics and chief economist at the world bank. after two years of that, he made a momentous career change by walking across the 19th street in downtown washington to become the first deputy managing director of the international monetary fund ( imf ), in which position he served for seven years from 1994 to 2001. at the end of 2001, prof. fischer joined the influential washington - based financial advisory body, the group of thirty. at least two generations of students of economics, not just in the us, but around the world, have learnt their macroeconomics from the seminal text book “ macroeconomics ” that stan co - authored with late rudi dornbusch. he wrote several other books, all noted for their original thinking, intellectual insights and clarity of argumentation. stan fischer assumed office as the governor of the bank of israel in may 2005. he was associated with the bank of israel in the past, having served as an american government adviser to israel ’ s economic stabilization program in 1985. on may 2, 2010, he was sworn in for a second term at which time the prime minister of israel said of stan fischer, “ this is a man on whom there is no disagreement in the whole world that he does excellent work ”. prof. fischer has made a distinct mark in academic research and analysis. his principal contribution has been on the role of activist policy in stabilizing an economy, and the effects of lags and uncertainty on the effectiveness of