What is Wholesale Price Index (WPI)? and How is WPI Inflation Rate Calculated in India?
What is Wholesale Price Index (WPI)?
WPI is a measure of price movement at the production level in the economy. Wholesale price index (WPI) captures the price of representative commodity basket of 697 items at the wholesale level, ie, goods traded in bulk and between organizations, not the end consumers.
Wholesale Price Index India: Difference Between WPI and CPI
After 2014, the Reserve Bank of India switched to Consumer Price Index (CPI) and no longer uses WPI for its policy purposes including the setting of repo rate. CPI measures the average price that households pay for a basket of different goods and services and it is used as a key measure of inflation. The main difference between WPI and CPI is that CPI or retail inflation measures the price of goods and services sold directly to consumers. Whereas WPI measures the average change in price of goods sold in bulk quantity between traders.
Who Publishes WPI Data in India
The Office of Economic Advisor in the Ministry of Statistics and Program Implementation releases the WPI data every month. Currently, the Central Statistics of Organization regards FY12 as a year with less abnormalities. Hence with an aim to keep the index in line with the base year of other important indicators (GDP and IIP) the base year for the new series of WPI was updated to FY12 from FY05.
Significant Components of Wholesale Price Index (WPI)
The significant components of Wholesale price index (WPI) include manufactured products, primary articles, fuel, and power. The biggest component in WPI is the manufactured goods (includes the manufacture of food products, textiles, paper, chemicals and more) whereas CPI is dominated by food products. Another important component of WPI is primary articles with a weightage of nearly 23%. Primary articles are further divided into Food articles (Cereals, paddy, wheat, vegetables, fruits, milk, among others) and Non-food articles (oil seeds, minerals, crude petroleum among others). The next major component of WPI is the fuel and power group which tracks the price movement in petrol, LPG and diesel. The weightage given to this component stands at 13%.
|MAJOR GROUPS IN CPI||WEIGHTS GIVEN TO CPI COMPONENTS|
|FOOD AND BEVERAGES||45.8%|
|FUEL AND LIGHT||6.8%|
|MAJOR GROUPS IN WPI||WEIGHTS GIVEN TO WPI COMPONENTS|
|FUEL AND POWER||13.1%|
WPI Index Formula & How it is Calculated
To calculate the Whole price index Jevons Index formula (a geometric mean of price relatives), Laspeyre’s index formula and weighted arithmetic mean is utilised.
Within WPI, a sub-index known as WPI food index is also calculated in the new WPI series. WPI food index is a combination of food articles from primary articles and food products from manufactured products components.
The Economy of India – Data and Statistics – Indiamacroadvisors.com