Whole Sale Price Index (WPI)
In economics, Inflation means a rise in general level of prices of goods and services in
an economy over a period of time. When the general price level rises, each unit of
currency buys fewer goods and services. Thus, inflation results in loss of value of
money. Another popular way of looking at inflation is "too much money chasing too
few goods".
The rate at which the prices of goods and services increases over a particular period
of time normally a year is termed as ‘Inflation Rate’.
Since monetary policies are influenced by inflation and inflationary expectations in
the economy it is therefore, critical that inflation index should be able to predict
future inflation with reasonable accuracy.
Indicators of Measure of Inflation
Whole-sale price index (WPI) and Consumer price index (CPI) are the two
primary measures of inflation.
Whole-sale price Index: - WPI index reflects average price changes of goods
that are bought and sold in the wholesale market. WPI in India is published by
the Office of Economic Adviser, Ministry of Commerce and Industry. Further,
the data for WPI is monitored and updated on a monthly basis taking into
account all the 679 items that form the index. The various commodities taken
into consideration for computing the WPI can be categorized into primary
article, fuel and power, and manufactured goods.
Primary articles included for the computation of WPI include food articles, nonfood articles and minerals. In the fuel, power, light and lubricants, electricity,
coal mining and mineral oil are included. The manufactured goods category
encompasses food products; beverages, tobacco and tobacco products, wood
and wood products, textiles, paper and paper products, basic metals and
alloys, rubber and rubber products and many others.
All Commodities
100.00%
I
(A)
Primary Articles
Food Articles
20.12%
14.34%
(B)
Non-Food Articles
4.26%
(C)
Minerals
1.52%
II
Fuel & Power
14.91%
(A)
(B)
Coal
Mineral Oils
2.09%
0.09%
(C)
Electricity
0.03%
III
Manufactured Products
64.97%
(A)
(B)
Food Products
Beverages, Tobacco and Tobacco Products
9.97%
1.76%
(C)
Textiles
7.33%
(D)
(E)
Wood & Wood Products
Paper & Paper Products
0.59%
2.03%
(F)
Leather & Leather Products
0.84%
(G)
(H)
Rubber & Plastic Products
Chemicals & Chemical Products
2.99%
12.02%
(I)
Non-metallic Mineral Products
2.56%
(J)
(K)
Basic Metals, Alloys & Metal Products
Machinery & Machine Tools
10.75%
8.93%
(L)
Transport Equipment & Parts
5.21%
Source : http://eaindustry.nic.in/Download_Data_0405.html
Further, as WPI accounts for changes in general price level of goods at
wholesale level, it fails to communicate actual burden borne by the end
consumer.
WPI is the primary measure that is used by the Indian central government for
ascertaining inflation as WPI in contrast to CPI accounts for changes in price at
an early distribution stage.