Wholesale Price Index

Introduction

• Wholesale Price Index (WPI) represents the price of goods at wholesale stage, i.e., goods that are sold in bulk and traded between organizations instead of consumers.
• The WPI basket  covers commodities falling under the three major groups, namely Primary Articles; Fuel and Power; and Manufactured products. 

Key Points

• It does not cover services.
• In India, WPI is also known as the ‘Headline Inflation rate’. 
• It  does not include indirect taxes in order to remove the impact of fiscal policy. This brings WPI closer to the Producer Price Index, which is globally used.
• It is used as a deflator for nominal macroeconomic aggregates like GDP and Index of Industrial Production (IIP) because these are calculated at basic price (does not include product tax) which makes it compatible and appropriate deflator.
• Presently, It  is calculated with respect to the revised base year, 2011-12.
• In India, the Office of Economic Advisor (OEA) under the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry calculates the WPI.
• There are 697 (earlier 676) items in the WPI basket.
• WPI was the main index for measurement of inflation in India till April 2014 when the RBI adopted Consumer Price Index (CPI) as the key measure of Inflation.
• The prices of goods in this basket tracked are ex-factory prices for manufactured products, mandi prices for agricultural commodities and ex-mines prices for minerals.

WPI Food Index

• It  is a sub index of WPI, which measures the changes in prices of food items at the level of producers.
• It is compiled by taking the aggregate of WPI for “Food Products” under “Manufactured Products” and “Food Articles” under “Primary Article” using weighted arithmetic mean.