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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.

·        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.

·         Wholesale Price Index Consumer Price Index Published by Economic Advisor in the Ministry of Commerce and Industry.

·        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.

·        • 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.

·         Constituents The primary index that tracks the change in wholesale prices of goods only.

·        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.

·        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.

·        Interval It releases weekly for primary articles, fuel, and power. It releases monthly.

·         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)?

·        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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