Difference Between Consumer Price Index (CPI) and Wholesale Price Index (WPI)

What is Wholesale Price Index (WPI)?

What is the Consumer Price Index (CPI)?

Difference Between the Wholesale Price Index and the Consumer Price Index

Comparison WPI CPI
Measurement Measures the average change in prices received by domestic producers for their output Measures average change in prices of goods and services consumed by households
Indicator of Inflation The leading indicator of inflation Lagging indicator of inflation
Coverage and Sample Size Covers a smaller sample of goods and services Covers a broader range of goods and services used by households
Purpose Mainly used to track inflation in the wholesale market Primarily used for tracking inflation in the consumer market
Components Includes prices of primary articles and fuel Includes prices of food, housing, clothing, transport, medical care, etc.
Weightage It gives a higher weightage to primary articles and fuel It provides a higher weightage to food and housing
Base Year The base year is usually updated every five years The base year is generally updated every 10 years
Impact on Monetary Policy Direct impact on monetary policy Indirect impact on monetary policy

Does Reserve Bank of India (RBI) Use CPI or WPI?

Distinguishing Features Between the Wholesale Price Index (WPI) and the Consumer Price Index (CPI)

FAQs about WPI vs CPI

How does the Reserve Bank of India use WPI and CPI for monetary policy?

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The Reserve Bank of India (RBI) formulates its monetary policy using both WPI and CPI. WPI is an indicator of inflation in the wholesale market, while CPI is an indicator of inflation in the consumer market. The RBI also uses these indicators to determine the interest rate and make other monetary policy decisions.

What is the impact of WPI and CPI on Government policies?

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WPI and CPI play crucial roles in government policies. The government uses data provided by these indexes for various decision-making purposes, including:

  • Subsidies
  • Social security payments
  • Tax brackets
  • Fiscal policies
  • Allocation of funds
  • Adjustment of budget
  • Other government benefits

Who calculates and publishes WPI and CPI?

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The Office of Economic Adviser (OEA) under the Ministry of Commerce and Industry, Government of India, calculates and publishes WPI. The Central Statistics Office (CSO) under the Ministry of Statistics and Programme Implementation, Government of India, estimates and publishes CPI.

Who determines the repo rate?

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The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) sets the repo rate in India.

Who is responsible for inflation in India?

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The Government of India, in coordination with the Reserve Bank of India (RBI), sets an inflation target every five years. The RBI is responsible for managing inflation through its monetary policies.

Is the consumer price index (CPI) the same as inflation?

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The Consumer Price Index (CPI) is not the same as inflation but is a key indicator used to measure inflation.

CPI is a specific index used to measure changes in consumer prices, and inflation refers to the broader economic phenomenon of rising prices affecting the overall economy. CPI is a crucial component in assessing inflation, but it's not the only measure used for this purpose.

Which is more important: CPI or WPI?

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Both the Consumer Price Index (CPI) and the Wholesale Price Index (WPI) serve different purposes and are important economic indicators, depending on the context and objectives of the analysis.

  • CPI includes a range of household goods and services, giving a comprehensive view of how inflation affects consumers' cost of living and purchasing power. 
  • WPI typically includes prices of goods traded in bulk, such as raw materials, intermediate goods, and commodities. It helps businesses understand cost trends, forecast production costs, and adjust pricing strategies.
  • For Consumers and Policymakers, CPI is more important because it directly impacts consumers' purchasing power and standard of living.
  • For Businesses and Production, WPI is more important because it reflects input costs and price trends at the wholesale level, influencing production decisions, profit margins, and economic forecasts.

Who publishes WPI?

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Department for Promotion of Industry and Internal Trade, Office Of The Economic Adviser, Ministry of Commerce & Industry

Can WPI be higher than CPI?

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Yes, the Wholesale Price Index (WPI) can be higher than the Consumer Price Index (CPI), although this situation is not typical under normal economic conditions. A few scenarios where WPI might exceed CPI include input cost increases, supply chain disruptions, sectoral differences, and government interventions.

What is the difference between WPI and CPI?

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WPI (Wholesale Price Index) measures the average change in prices of goods at the wholesale level before they reach consumers. CPI (Consumer Price Index) measures the average change in prices of goods and services at the retail level, reflecting the cost of living for consumers.

Why did India choose CPI over WPI?

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India chose CPI over WPI for monetary policy because CPI better reflects the inflation experienced by consumers, which is more relevant for assessing the cost of living and making policy decisions to control inflation.

Does RBI use CPI or WPI?

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The RBI (Reserve Bank of India) primarily uses CPI for its inflation-targeting framework and monetary policy decisions.

Is CPI calculated monthly?

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CPI is calculated and released every month.

Is WPI released monthly?

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WPI is also calculated and released on a monthly basis.

Is high CPI good or bad?

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A high CPI generally indicates high inflation, which is often considered bad as it erodes purchasing power and increases the cost of living for consumers.

Is CPI always 100?

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No, CPI is not always 100. The base year CPI is set at 100, and subsequent CPI values reflect the percentage change in the price level relative to the base year.

Disclaimer

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  • This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
  • All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
  • Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.

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