What Is WPI Inflation: Causes, Impact and Calculation

What Is WPI Inflation?

What Causes WPI Inflation?

How Does WPI Inflation Work?

How Is WPI Inflation Calculated?

FAQs on WPI Inflation

What is the difference between WPI inflation and CPI inflation? up-arrow

WPI inflation and CPI inflation are both measures of inflation, but they are calculated differently. Here is how they differ from each other:

  • WPI Inflation: It is based on the movement of wholesale prices of a basket of goods and services.
  • CPI Inflation: It is based on the movement of retail prices of a basket consumed by households.

Why is WPI inflation important to monitor? up-arrow

WPI inflation is important to monitor as it can have a significant impact on the economy. Policymakers, businesses and investors closely monitor it since doing so can provide insight into changes in prices and trends in the economy. It assists in making monetary and fiscal policy decisions.

How does WPI inflation impact interest rates? up-arrow

The Reserve Bank of India (RBI) closely watches the WPI inflation as it can impact interest rates. High WPI inflation can lead to an increase in interest rates as the RBI may take monetary policy action to curb inflation. Low WPI inflation may lead to a decrease in interest rates.

How does WPI inflation impact the exchange rate? up-arrow

WPI inflation can impact the exchange rate as changes in wholesale prices can affect the cost of imports and exports. High WPI inflation can make exports less competitive in the global market, which can lead to a depreciation of the currency. Low WPI inflation can make exports more competitive, which can lead to an appreciation of the currency.

How can businesses use WPI inflation data? up-arrow

Businesses can use WPI inflation data to plan and budget accordingly, as it can provide insight into changes in prices and trends in the economy. It can help in making pricing and production decisions.