Economy
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Wholesale price
inflation hit 15.08% in April, the highest since September 1991, having grown
at double-digit rates for the 13th month in a row.
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Meanwhile, inflation
based on the consumer price index (CPI), scaled an 8-year high of 7.79% in
April and breached the upper band of the RBI’s medium-term target for a fourth
straight month.
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Wholesale Price Index Consumer Price Index
Published by Economic Advisor in the Ministry of Commerce and Industry.
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Central Statistical
Office in the Ministry of Statistic and Programme Implementation Definition It
measures the average change in price in the sale of goods in bulk quantity by
the wholesaler.
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• It measures the average change in price in the sale of
goods or services in retail or the price of products or services sold directly
to consumers.
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Constituents The primary index that tracks the
change in wholesale prices of goods only.
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The primary index that
tracks the change in retail prices of essential goods and services consumed by
Indian households Feature Look at the price at which wholesaler supplies the
product Look at the price at which the consumer buys the product.
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Stage of transaction reflect 1st stage of transaction-WPI is
that the 1st level where the first price will increase in goods reflect final
stage of transaction-CPI is that the final level where the
price increases of goods or services Items It is restricted to goods covered
under WPI, primarily fuel, power, and manufacturing products.
·
Education, food,
transport, communication, recreation, apparel, housing, and medical care.
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Interval It releases
weekly for primary articles, fuel, and power. It releases monthly.
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Base year The base year for WPI is the
financial year-2011 The base year for CPI is the calendar year- 2011-12
How
is WPI unrelated to the CPI (likely causes of the divergence)?
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There are various layers between the
wholesale price and retail price: One is that the additional cost of
transportation from the wholesale to the point of sale– an increase in
this cost of transportation would be translated into a higher CPI but no effect
on the WPI.
·
Another is the retail
mark-up– if there is scarcity, the retail margin goes up, adding to the price.
Exclusion of services- the wholesale market is only for goods, you cannot buy
services on a wholesale basis. Differential weighing-Certain items on WPI, such
as fuel, are also closely linked to international prices, creating a gap
between the figures on this index and the CPI.
·
Differences in the
indirect taxes-WPI is the wholesale price index hence, excludes indirect taxes
levied on various goods.
How
is the CPI linked to the WPI?
·
Input prices and cost
of production- WPI includes the price of intermediate goods, if these are
dearer, goes on increasing the CPI in the longer run.
·
Imported inflation-WPI reflects the imported
inflation- especially in the crude oil price rise which is again a basic
intermediate good in various goods measured under the CPI.
·
Rise in transportation cost-due to rise in
crude oil prices.
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