CPI vs WPI
Notes
Consumer Price Index (CPI) measures changes in retail prices of goods and services bought by households. Wholesale Price Index (WPI) measures changes in prices of goods at the wholesale (bulk) level.
CPI
- CPI (Combined; rural, urban and combined) is compiled by the NSO, MoSPI with a base year of 2012 = 100, and released on the 12th of every month. Since the Urjit Patel Committee (2014), the RBI uses CPI-Combined to target inflation. MoSPI is moving to a revised base year.
- Labour Bureau (Ministry of Labour) publishes: CPI-IW (Industrial Workers; used to fix dearness allowance), CPI-AL (Agricultural Labourers) and CPI-RL (Rural Labourers).
- Food and beverages carry the largest weight (nearly half of the basket in the 2012 series). It includes services (housing, education, health, transport).
WPI
- Compiled by the Office of the Economic Adviser, DPIIT (Ministry of Commerce and Industry), with a base year 2011-12 = 100; released on about the 14th of every month.
- Covers goods only (no services); about 697 items in the 2011-12 series. Weights: Manufactured products (about 64%), Primary articles (about 23%), Fuel and power (about 13%).
- It excludes indirect taxes. A Producer Price Index (PPI) is being developed.
Basis | CPI | WPI |
|---|---|---|
Measures | Retail prices paid by consumers | Wholesale (bulk) prices of goods |
Coverage | Goods and services | Goods only |
Agency | NSO (MoSPI); Labour Bureau for CPI-IW, AL, RL | Office of the Economic Adviser (DPIIT) |
Base year | 2012 (CPI Combined) | 2011-12 |
Largest weight | Food and beverages | Manufactured products |
Indirect taxes | Included | Excluded |
Use | RBI's inflation target; DA calculation (CPI-IW) | Indicator of producer and market trends |
Key Points
- CPI: retail prices, includes services; used for RBI's inflation target.
- WPI: wholesale goods only; no services; compiled by the Office of the Economic Adviser.
- CPI-IW is used for dearness allowance.
- CPI food weight is high; WPI is dominated by manufactured products.
- CPI is released on the 12th; WPI around the 14th.
MCQs
Q1. Inflation targeting by the RBI is based on:
(a) WPI
(b) CPI (Combined)
(c) GDP deflator
(d) CPI-IW
Ans: (b) .
Q2. The Wholesale Price Index includes:
(a) Services
(b) Goods only
(c) Retail prices
(d) Indirect taxes
Ans: (b) .
Q3. Dearness allowance for central government employees is linked to:
(a) CPI-IW
(b) WPI
(c) CPI-AL
(d) GDP deflator
Ans: (a) .