WHAT IS WHOLESALE INFLATION AND HOW IT IS.
                     WHAT IS 
WHOLESALE 
INFLATION 
AND HOW IT 
IS GOOD 
FOR THE 
ECONOMY?
1
INTRODUCTI
ON
Retail inflation soared to almost 7 percent, 
hurting household spending in july. But you 
know how inflation is monitored and 
measured, even with all the buzz about this 
figure? Here's how the inflation rates, the 
indexes used to calculate them, and what 
they mean are arrived at.
Source: livemint.com
WHAT IS 
CPI?
• Inflation can be defined as the average 
increase over time in the price of goods 
and services in an economy. 
• It is determined by tracking the rise in 
critical goods rates. The Consumer Price 
Index, or CPI, is the primary index that 
measures the shift in retail prices of basic 
products and services used by Indian 
households.
Source: neoiascap.com
MONITOR THE PRICE 
CHANGE 
• The index assigns various weights in the 
basket to different goods and services 
and records the movement of their 
values. 
• To measure the total inflation figure or CPI 
inflation, it also monitors the price 
change of the whole basket at a pan-India 
basis. 
Source: The Balance
CPI'S FOOD 
WEIGHTAGE 
• The CPI's food weighting is equivalent to 
50 percent, but most households don't 
spend even as much of their total food 
budget. 
• Services such as schooling, health care 
and transportation, where inflation levels 
are even higher, are what we spend most 
on.
Source: livemint.com
WHAT IS 
WPI?
• The Wholesale Price Index (WPI) is the 
other index which measures inflation. 
• Although retail inflation looks at the price 
at which the commodity is bought by the 
consumer, WPI is calculated at the 
wholesale level depending on costs. 
Source: financialexpress.com
HOW IT 
WORKS?
• Both the selling price and the retail price, 
are two layers, one of which is the extra 
cost of shipping from the wholesale to the 
point of sale, and the other is the retail 
mark-up. 
• Similarly, where there is shortage, the 
retail margin rises, adding to the price. 
Source: livemint.com
WHOLESALE VS. RETAIL 
PRICE
• Key difference between the two indices is 
that you can not buy services on a 
wholesale basis only for products on the 
wholesale market. 
• Therefore, WPI does not include services, 
whereas the retail price index does The 
wholesale and retail pricing requirements 
are also different.
Source: livemint.com
WPI VS. 
CPI
• Some WPI products, such as petrol, are 
also closely related to foreign markets, 
causing a difference between the index 
and the CPI statistics. 
• While CPI is the consumer's most 
important index since it indicates the rise 
in their real production, it is not a fully 
reliable cost of living measure. 
• Inflation's net result is that your money's 
worth declines with time, so make sure 
that your savings are aligned and 
diversified so that your corpus can be 
inflation-proof.
Source: livemint.com
THE PRODUCER PRICE 
INDEX
• The PPI relies on the same calculation 
formula as the WPI, but it includes the 
prices of services, as well as physical 
goods, and eliminates the component of 
indirect taxes from prices.
Source: Investopedia
CONCLUSI
ON
• Wholesale Price Index (WPI) represents 
the price of goods at a wholesale stage 
i.e. goods that are sold in bulk and traded 
between organisations instead of 
consumers. WPI is used as a measure of 
inflation in India.
Source: The Economic Times