Context: India’s wholesale price inflation recently quickened to the highest level in eight months.
More on the trend:
- It reached 1.48% in October 2020, compared with 0% in October 2019 and 1.32% in September this year.
- Revised data for August:
- The WPI for August 2020 has been revised upwards from 0.16% as reported earlier to 0.41%,.
- This revision assumes significance as August 2020 marked the first month since March that the WPI clocked positive growth, which was considered a sign of an industrial recovery with producers’ pricing power returning.
- Data for October 2020: It suggests that the trend in August has strengthened with manufactured group inflation hitting a 19-month high of 2.1%, and core inflation accelerated to the highest level in 18 months at 1.7%.
- A sign of recovery?
- An increase in core inflation suggests an improvement in demand conditions, which have improved after the COVID-related lockdown was lifted.
- However, it will be too early to term this as a general recovery; a large part of this is due to festival-related demand.
Wholesale Price Index
- A wholesale price index (WPI) is an index that measures and tracks the changes in the price of goods in the stages before the retail level that is, goods that are sold in bulk and traded between entities or businesses instead of consumers.
- It is published by the Office of Economic Adviser, Ministry of Commerce and Industry.
- The base year of All-India WPI has been revised from 2004-05 to 2011-12 in 2017.
Consumer Price Index
It is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.
- Base Year for CPI is 2011-12.
- Four types of CPI are as follows:
- CPI for Industrial Workers (IW)
- CPI for Agricultural Labourer (AL)
- CPI for Rural Labourer (RL)
- CPI (Rural/Urban/Combined)
- Of these, the first three are compiled by the Labour Bureau in the Ministry of Labour and Employment.
- Fourth is compiled by the Central Statistical Organisation (CSO) in the Ministry of Statistics and Programme Implementation.
CPI v. WPI
- WPI, tracks inflation at the producer level and CPI captures changes in prices levels at the consumer level.
- Both baskets measure inflationary trends but the two indices differ in weightages assigned to food, fuel and manufactured items.
- Moreover WPI does not capture changes in the prices of services, which CPI does.
- In April 2014, the RBI had adopted the CPI as its key measure of inflation.