The difference in WPI and CPI, measurement of inflation

cpi wpi

Wholesale Price Index(WPI) was main index for measuring of inflation in India till 2014. RBI adopted new CPI(Combined) as the key measure of inflation.

Differences in CPI and WPI

  • WPI is calculated by Office of Economic Advisor, Ministry of Commerce while CPI is calculated by CSO, Ministry of Statistics.
  • Categories in WPI:
    Primary Articles(20%),
    Manufactured Products(64%),
    Fuel and Power(16%).
    Categories in CPI:
    Food and Beverages(54%)
    Pan, Tobacco, Intoxicants(3%)
    Clothing and Footwear(7.3%)
    Fuel and Light(7.9%)
  • WPI highest weightage: Manufactured Products
    CPI highest weightage: Food and Beverages
  • Base year of WPI: 2011-12
    Base year of CPI: 2012
  • WPI and CPI both are calculated monthly
  • WPI is not targeted by RBI while CPI is targeted by RBI
  • WPI does not take into consideration the retail prices and services while CPI does.
  • WPI does not include services. While CPI includes services.
  • WPI is released by Ministry of Commerce, while CPI released at National level: CPI(For Industrial Worker)
    CPI(Agricultural labour/ Rural labour)
    CPI(Rural/ Urban combine)
    First two are compiled by Labour Bureau, Ministry of Labour. Third that is CPI(combined) is compiled by CSO, Ministry of Statistics.
  • WPI is no longer used to calculate Inflation. While RBI use CPI(Combined) for calculating inflation.
  • WPI has 676 items divided in three categories(Primary Articles, Manufactured Articles, Fuel and Power).
    CPI has 448 items in rural and 460 items in urban, so CPI basket is broader than WPI basket.

Some more differences in WPI and CPI

1. Primary use of WPI is to have inflationary trend in economy as a whole. However CPI is used for adjusting income and expenditure streams for changes in cost of living.

2. WPI is based on Wholesale prices for Primary articles, factory prices for manufactured products and administered prices for fuel items. On the other hand CPI is based on retail prices which includes all distribution costs and taxes.

3. CPI covers only  consumer goods and services while WPI covers all goods including intermediate goods transacted in the economy.

4. WPI weights primarly based on national accounts and enterprises survey data. While CPI weights are derived from consumer expenditure  survey data.

5. Prices of WPI collected on voluntary basis while prices data for CPI are collected by investigators by visiting markets.