WPI - ECONOMY
News: After 18 months, Wholesale inflation slipped below 10% in October
What's in the news?
● India’s wholesale price
inflation slipped below 10% for the first time in 19 months this October,
when it eased to 8.4% to 10.7% in September, thanks to base effects and cooling
commodity prices.
● This
is the fifth successive month of wholesale inflation moderating since it hit a
record high of 16.63% in May.
● India’s
retail inflation cooled to 6.77% in October from 7.41% in September, slipping
below the 7% mark for the first time in three months and only the second time
since April’s eight-year high mark of 7.8%.
● This
is the tenth month in a row that inflation has been over the 6% upper tolerance
threshold mandated for the Reserve Bank of India (RBI).
● The last time consumer price inflation was below the 7% mark was in July, at 6.71%.
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.
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.
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.