Inflation Indicators in India: WPI and CPI
14.05.2025
Inflation Indicators in India: WPI and CPI
Context:
In April 2025, India's retail inflation fell to 3.16%, the lowest in nearly six years, driven mainly by cheaper food items like vegetables and pulses. This is the sixth month in a row that inflation has declined, bringing relief to households and signaling improved price stability.
Understanding WPI – Wholesale Price Index
The WPI measures the average change in prices of goods traded in bulk at the wholesale level. It reflects cost pressures experienced by producers and large-scale distributors.
- Released by: Office of the Economic Adviser, Ministry of Commerce and Industry.
- Base Year: Revised from 2004-05 to 2011–12 in 2017.
- Coverage: Only goods, excluding services.
- Weightage: Higher for manufactured products (approx. 64%), and lower for food articles (about 15.26%).
Understanding CPI – Consumer Price Index
CPI reflects the price variation from the consumer’s standpoint. It tracks changes in the retail prices of a fixed basket of goods and services used by households.
- Released by: National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI).
- Base Year: 2012.
- Coverage: Includes both goods and services.
- Weightage: Food and beverages dominate with about 45.86% share.
- Types of CPI :
- CPI for Industrial Workers (CPI-IW)
- CPI for Agricultural Labourers (CPI-AL)
- CPI for Rural Labourers (CPI-RL)
- CPI (Rural/Urban/Combined)
- The first three are compiled by the Labour Bureau, and the last by NSO.
- A new CPI-IW series was launched with base year 2016 by the Ministry of Labour and Employment.
WPI vs CPI: Key Differences
|
Aspect |
WPI |
CPI |
|
Perspective |
Producer/wholesale level |
Retail/consumer level |
|
Coverage |
Goods only |
Goods and services |
|
Usage |
Industrial/trade policy insight |
Monetary policy formulation |
|
Published by |
Office of Economic Adviser |
National Statistical Office |
|
Base Year |
2011–12 |
2012 |
|
Dominant Weight |
Manufactured goods |
Food and beverages |
Concerns and Implications
- A widening gap between WPI and CPI may signal transmission lags in price increases or tax-related divergences (like GST on retail prices).
- Rising WPI can eventually spill over into CPI inflation, affecting households and prompting tighter monetary policies.
- Effective policy responses depend on accurate diagnosis of whether inflation is demand-pull (consumer-driven) or cost-push (producer-driven).
Conclusion
India’s WPI reflects supply-side trends, while CPI shows consumer impact. Balancing both is key for stable post-pandemic recovery.