Prelims Level
Mains Level
Prelims Syllabus : Economy Mains Syllabus : Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

In News:

  • Wholesale Price Index (WPI) fell for the third consecutive month to 2.76% in January from 5.54% in October 2018, 4.47% in November, and 3.8% in December.

Explained:

  • Largely to cooling fuel prices, Inflation in the crude petroleum and natural gas segment slowed sharply in January to a one-year low of 3.87% from 16.8% in December. Similarly, inflation in the fuel and power segment slowed to a 27-month low of 1.85% in January, driven in large part by the fact that the mineral oils segment also saw inflation slowing to a 27-month low of 0.11%.

What is WPI?

  • In India, the wholesale price index (WPI) is the main measure of inflation. The WPI measures the price of a representative basket of wholesale goods. In India, wholesale price index is divided into three groups: Fuel and Power (13.2 percent), Primary Articles (22.6 percent of total weight) and Manufactured Products (65.42 percent).
  • Wholesale Price Index is published by the Office of Economic Advisor (Ministry of Commerce & Industry).

Difference between WPI and CPI:

  • Wholesale price index measures inflation at each stage of production while Consumer price index measures inflation only at final stage of production.
  • Wholesale price index is the basis for the economic deflation rate while consumer price index is the basis for the inflation rate.
  • Wholesale price index is the middle point of the sum of all the goods bought by the traders whereas consumer price index is the middle point of the sum of all the goods bought by consumers.
  • The WPI is compiled and published by Office of the Economic Advisor on a weekly basis while the CPI is compiled and published by the Labour Bureau on a monthly basis in India. Wholesale Price Index (WPI) is based on the price prevailing in the wholesale markets or the price at which bulk transactions are made. The Consumer Price Index (CPI) is based on the final prices of goods at the retail level.
  • There are only few countries that us WPI to calculate inflation rates whereas many nations have already shifted to using CPI.
  • WPI is said to result an erroneous measure while CPI will describe actual cost of living and inflation rate more accurately.
  • There are a lot of insignificant goods that are considered in WPI. CPI, on the other hand, has well-selected variables.
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