2019 – Posted in: Daily News – Tags: CPI, Inflation

WHOLESALE PRICE INDEX

For: Preliminary & Mains

Topic covers: WPI, Inflation, Causes, Impact, CPI

News Flash

Wholesale price-based inflation hit a 22-month low of 2.45% in May on falling prices of food articles, fuel and power items.

The Wholesale Price Index (WPI)-based inflation was at 3.07% in April this year. It was 4.78% in May 2018.
The decline in the wholesale inflation rate to 2.45% from 3.07% in April suggests that retail inflation, may come down going ahead.
There is a slowdown in demand and that is the reason that core inflation is going down.
India’s economic growth slumped to a five-year low of 6.8% in fiscal 2019.
Core inflation at 1.2% is a 29-month low in May 2019. This is clearly an indication of the weakening of demand impulse in the economy.

Wholesale Price Index

The new series of WPI was released by the Government with the revised base year as 2011-12.

WPI represents the price of goods at a wholesale stage i.e. goods that are sold in bulk. WPI is used as a measure of inflation in some economies.

WPI is used as an important measure of inflation in India. Fiscal and monetary policy changes are greatly influenced by changes in WPI.

In the United States, the Producer Price Index (PPI) is used to measure inflation.

Inflation

A rise in the general level of prices; a sustained rise in the general level of prices; persistent increases in the general level of prices; an increase in the general level of prices in an economy that is sustained over time; rising prices across the boards- is inflation.

The inflation rate is the difference between WPI calculated at the beginning and the end of a year. The percentage increase in WPI over a year gives the rate of inflation for that year.

The rate of inflation is measured on the basis of two price indices – wholesale Price index and Consumer Price index.

CPI vs WPI

Wholesale inflation, measured by WPI, tracks year-on-year inflation at the producer or factory gate level and is a marker for price movements in the purchase of bulk inputs by traders.

CPI, captures changes in price levels at the shop end, and is, thereby, reflective of the inflation experienced at the level of consumers.

Source: Economic Times

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