Profile
Settings
Refer your friends
Sign out
Indexation is the practice of using a price index to modify financial results, including wages, interests, dividends, taxes, etc., to account for changes in the general price level to preserve consumer purchasing power. The Price Index is a figure that indicates how much the price of a group of commodities has changed over time as compared to last year. Learn the differences between the Consumer Price Index (CPI) and the Wholesale Price Index (WPI) by reading this article (WPI).
Wholesale Price Index
The Wholesale Price Index (WPI) is a metric for calculating the average price change when a wholeseller sells large quantities of anything. Before something reaches the ultimate level, the consumer, the WPI, examines the difference in commodities prices at the prescribed level. For growing goods prices, the WPI is the starting point. The WPI is published by the Ministry of Commerce and the Industry’s Office of Economic Advisor. WPI covers only goods, and the main categories covered are gasoline, electricity, plus manufactured goods. It publishes matching writers, fuel, and strength for the rest of the things weekly or monthly. The financial year is used as the base year by WPI.
There are 117 articles in the new WPI’s primary article group, up from 98 previously, while the energy and electricity category remains the same at 16. There are 564 manufactured products in the current series, compared to 318 in the previous series.
Each commodity’s price is tracked separately by the indicator. The WPI is calculated using the averaging concept based on this specific movement. The WPI is calculated using the following methods:
The wholesale price index (WPI) is calculated using the wholesale prices of a few key commodities from a pool of over 240. The commodities utilized in the computation are selected based on their importance in the location and period for the WPI. In India, for example, the WPI was calculated using about 435 elements in the base year 1993-94, but 697 items in the advanced foundation year 2011-12.
Consumer Price Index (CPI)
The CPI is a consumer price index that tracks changes in the price of products and services sold in retail stores and the price of goods and services sold directly to consumers. The CPI is the final level at which the price of goods or services increases. The Central Statistics Office of the Ministry of Statistics and Programme Implementation publishes the CPI. It applies to both commodities and services. Education, food, transportation, communication, recreation, clothes, housing, and medical care are all covered under the CPI. It is released once a month.
Four different CPI numbers are calculated in India, and they are as follows:
Industrial Workers’ CPI (IW), Agricultural Labourers’ CPI (AL), Rural Labourers’ CPI (RL), and Urban Non-Manual Employees’ CPI (UNME).
The Ministry of Statistics and Program Implementation gathers and compiles CPI (UNME) data, while the Labour Bureau of the Ministry of Labour collects the other three.
CPI is studied by the RBI and other statistical agencies to understand price changes in various commodities and to maintain track of inflation. The CPI is also useful for determining the real worth of wages, salaries, and pensions, as well as the buying power of a country’s currency and price regulation. Economists are already in charge of gathering information through polling households about their purchasing habits, most frequently items purchased, and everyday expenses.
What is the distinction between WPI and CPI?
- WPI calculates the total change in wholesale prices of commodities, whereas CPI calculates the specific change in retail costs of goods and services.
- The Office of Economic Adviser, Ministry of Commerce and Industry, publishes WPI data, whereas the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation, publishes CPI data (MoSPI).
- WPI has the base year of 2011-12, while CPI has the base year of 2012.
- WPI solely considers changes in the price of goods, whereas CPI considers changes in the prices of both goods and services.
Conclusion
The inflation rate is calculated using the Laspeyres Index in WPI and the CPI. While the consumer price index measures variation in the overall price level, A wholesale price index (WPI) measures and monitors changes in the price of items before they reach the retail level.
WPI was once used as the primary measure of inflation in India, but CPI has since been the preferred measurement method. This is because the average person does not engage in wholesale transactions regularly. Furthermore, it does not reflect pricing trends at the retail stage.
