The Wholesale Price Index (WPI) is a crucial economic indicator that measures the changes in prices of goods at the wholesale level in India. It tracks the average change in the price of a basket of goods traded in wholesale markets, including agricultural products, industrial raw materials, and manufactured goods.
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Calculation of Wholesale Price Index (WPI)
The WPI is calculated based on the price movements of over 800 items, including primary articles, fuel, and power, and manufactured goods. It is based on the price at which the goods are sold to bulk buyers such as traders and manufacturers. The WPI serves as a comprehensive view of the price movements of goods in the economy.
Significance of Wholesale Price Index (WPI)
The WPI is used to monitor inflation and price trends in the economy and is released by the Ministry of Commerce and Industry on a weekly basis. Investors and traders in the financial markets closely watch the WPI, as it is often used as a leading indicator of inflation and interest rates. When the WPI is high, it indicates that prices are rising at the wholesale level, which could eventually translate into higher consumer prices. This, in turn, could lead to higher interest rates, which could impact the overall economy.
Changes to the WPI Calculation Methodology
In recent years, the Indian government has made several changes to the WPI calculation methodology to make it more accurate and relevant. In 2017, the government introduced a new WPI with a revised base year. The revision aimed to better reflect the current market scenario and address data gaps, making the WPI a more effective tool for policymakers, businesses, and investors.
In Conclusion, The WPI is a valuable tool for tracking inflation and price trends in India’s economy. Its comprehensive view of the price movements of goods in the economy serves as an essential tool for policymakers, businesses, and investors. With the changes in the calculation methodology, the WPI has become more accurate and relevant, providing better insights into the Indian economy’s performance.
Comparison between WPI and CPI
| Criteria | WPI | CPI |
| Definition | Measures changes in prices of goods at the wholesale level | Measures changes in retail prices of goods and services consumed by households |
| Calculation | Based on the price movements of over 800 items including primary articles, fuel, power, and manufactured goods | Based on the price movements of a basket of goods and services consumed by households in different parts of India |
| Frequency of Release | Weekly | Monthly |
| Usefulness | Provides insights into price movements at the wholesale level | Provides insights into inflation at the consumer level and cost of living for households |
| Scope | Covers goods at the wholesale level | Covers goods and services consumed by households across different sectors of the economy |
| Impact on Economy | Used to monitor inflation and price trends in the economy | Used to track the cost of living for households and inform monetary policy decisions |
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