WPI vs CPI

W.P.I	C.P.I
Wholesale price index measures inflation at each stage of production	Consumer price index measures inflation only at final stage of production
Wholesale price index is the middle point of the sum of all the goods bought by the traders	Consumer price index is the middle point of the sum of all the goods bought by consumers
Wholesale Price Index (WPI), is based on the price prevailing in the wholesale markets or the price at which bulk transactions are made	The Consumer Price Index (CPI), is based on the final prices of goods at the retail level.
There are only few countries that uses WPI to calculate inflation rates	Many nations have already shifted to using CPI.
There are 676 elementary items included in WPI, some of which are insignificant & outdated goods that are considered in WPI	CPI, on the other hand, have well-selected variables.
Category Weights – Base Year is 2004-05 with Energy Products having 14.91% weights, food 14.3% while services are not included.	Category Weights – Base Year is 20105 with Energy Products having 9.49% weights, food 49.7% while services are included with 26.3% weightage.

Reasons for Widening gap between CPI and WPI

Monthly variation between CPI and WPI inflation during January 2012 to January 2013 shows that the direction of the differential is on the rise.

The gap between inflation calculated at WPI (Wholesale Price Index) and CPI (Retail Price Index) has been found widening in the recent months. Monthly variation between CPI and WPI inflation during January 2012 to January 2013 shows that the direction of the differential is on the rise.

WPI inflation has been decelerated to 6.62% in January 2013 from 7.2% in January 2012, however, CPI Inflation has been increased from 7.7% in January 2012 to 10.8% in January 2013.

• The widening gap between prices at wholesale level and retail level could be attributed to supply chain bottlenecks which impede the process of smooth distribution of goods. Post-production hurdles at several levels including storage, packaging, marketing and infrastructure is a major fuel to retail prices
• A second reason may be the high weightage of food prices in calculation of CPI. In the WPI, food articles have a 14.33% weight. In the CPI (Rural+Urban), the food index has a 47% weight.Soaring food prices has been a major issue in India. Inflation in the food articles (WPI) has been increased from 6.7% in October 2012 to 8.8% in November 2012 to 11% in December 2012 and 11.8% in January 2013.CPI for food and beverages rose to 13.3% in January 2013 from 13% in December 2012, 11.8% in November 2012 and 11.4% in October 2012

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