WHOLESALE PRICE INFLATION - ECONOMY
News: Wholesale
price inflation declines to 4.95% in December 2022
What's in the news?
● India’s
wholesale price inflation slipped to a 22-month low of 4.95% in December 2022 from 5.85% in November, fostering hopes of
further easing in the price rise faced by consumers, as producers may slow down
the pass-through of input costs at the retail level.
Key takeaways:
● Wholesale
inflation had hit a record high of 16.63% in May 2022 and was above the 10%
mark for 18 successive months till September 2022.
● This
is the second month in a row that wholesale inflation has been lower than
retail inflation which came in at 5.88% in November and 5.72% for December.
WPI:
What is the Wholesale Price Index?
● The
Wholesale Price Index is an index that measures and tracks the changes in the
price of goods in the stages before the retail level.
● The
base year for the WPI will be 2011-12.
Released by:
● WPI
is Published by the Office of Economic
Adviser, Ministry of Commerce and Industry.
Components:
WPI
includes three components:
● Manufactured
products - 64.2%
● Primary
articles - 22.6%
● Fuel
and power - 13.1%
(M > P> F&P>)
● The
number of items covered in the new series of the WPI has increased from 676 to
697.
● The
WPI does not capture changes in the prices of services, which CPI does.
Go back to basics:
What is Inflation?
● Inflation
is defined as a situation where there is sustained, unchecked increase in the
general price level and a fall in the purchasing power of money.
Core Inflation:
● Core
inflation is the change in the costs of goods and services, but it does not
include those from the food and energy sectors.
● This
measure of inflation excludes these items because their prices are much more
volatile.
CPI:
● It
measures price changes from the perspective of the retail buyer.
● The
National Statistical Office
publishes it.
● The
CPI calculates the difference in the prices of commodities and services
purchased by Indian consumers for use, such as food, medical care, education,
electronics etc.
● Food
and beverages, fuel and light, bedding and footwear, housing, and clothing are
all sub-groups of the CPI.
Types:
CPIs
are classified into four types:
● CPI
Industrial Workers - Labour Bureau
● CPI
Agricultural Labourer - Labour Bureau
● CPI
Rural Labourer - Labour Bureau
● CPI
(Urban/Rural/Combined) - NSO
The first three are compiled by the Labour Bureau,
which is part of the Ministry of Labour and Employment. The NSO at the Ministry
of Statistics and Programme Implementation compiles the fourth.
Base year:
● CPI's
base year is 2012.
● The
Ministry of Labour and Employment recently released the new series of Consumer
Price Index for Industrial Workers (CPI-IW)
with 2016 as the base year.
Usage:
● CPI
data are used by the Monetary Policy
Committee (MPC) to control inflation. The Reserve Bank of India (RBI)
adopted the CPI as its key measure of inflation in April 2014.
What is the difference between WPI and CPI?
● WPI
measures inflation at the producer level, whereas CPI measures price changes at
the consumer level.
● WPI
does not account for changes in service pricing, but CPI does.
● In
the WPI, manufactured goods are given more weightage, whereas food items are
given more weightage in the CPI.