Wholesale Price Index (WPI)

GS 3 – Economy

The WPI measures the average change in the price of goods at the wholesale level, i.e., before they reach the retail market.

Scope: It tracks changes in the prices of goods traded in bulk, typically between businesses rather than between consumers.

 

Components of WPI

1. Categories: The WPI is categorized into three broad groups:
   • Primary Articles (e.g., agricultural products, minerals): ~22.62% weight.
   • Fuel and Power (e.g., coal, electricity, petroleum): ~13.15% weight.
   • Manufactured Products (e.g., textiles, chemicals, machinery): ~64.23% weight.
2. Base Year:  2011-12

 

Calculation of WPI

WPI is calculated using the Laspeyres formula:

 

Significance of WPI

1. Indicator of Inflation:
   • WPI is a primary measure of inflation at the wholesale level.
   • The Office of the Economic Adviser, under the Ministry of Commerce and Industry, releases the WPI data monthly.
2. Policy Formulation:
   • Used by the Reserve Bank of India (RBI) for analyzing inflationary trends and framing monetary policies.
3. Industrial and Trade Impact:
   • Helps businesses and industries gauge price trends for raw materials and intermediate goods.
4. Comparison with CPI:
   • WPI: Measures wholesale prices, focusing on the producer or bulk seller.
   • CPI (Consumer Price Index): Measures retail prices, focusing on the end consumer.