📌 Consumer Price Index (CPI)
Definition:
The Consumer Price Index (CPI) measures the average change over time in the prices paid by urban consumers for a market basket of goods and services. It reflects the cost of living for the average consumer and is commonly used to assess inflation from the consumer’s perspective.
Formula:
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CPI > 100 → Indicates inflation (prices have increased since base year)
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CPI < 100 → Indicates deflation (prices have decreased since base year)
Example:
If the cost of a basket of goods in the base year is ₹1000, and in the current year it is ₹1200:
CPI= ( 1200 / 1000 ) × 100 = 120 CPI
This means 20% inflation over the period.
📌 Wholesale Price Index (WPI)
Definition:
The Wholesale Price Index (WPI) measures the price of goods at the wholesale level, i.e., prices charged by producers or wholesalers to retailers before reaching the final consumer. It reflects price trends in the early stages of production and distribution.
Formula:
Example:
If the cost of wholesale goods in the base year is ₹1000, and in the current year it is ₹1100:
WPI = ( 1100 / 1000 ) × 100 = 110 WPI
This indicates a 10% increase in wholesale prices.
📊 Differences Between CPI and WPI
| Feature | Consumer Price Index (CPI) | Wholesale Price Index (WPI) |
|---|---|---|
| 🎯 Purpose | Measures inflation from consumer’s viewpoint | Measures inflation at wholesale/producer level |
| 📦 Scope | Includes consumer goods & services | Includes only goods (raw materials, intermediates, etc.) |
| 🗺️ Geographical Focus | Urban areas | Nationwide wholesale markets |
| 📉 Inflation Impact | Directly affects cost of living and purchasing power | Indicates inflation before prices reach consumers |
| 🛒 Goods Covered | Consumer goods and services | Raw materials, intermediate and some finished goods |
| 🧮 Usage | Used to adjust wages, pensions, and social benefits | Used to track industrial/production sector inflation |
| 🧾 Services Included | ✅ Yes – includes services like education, healthcare | ❌ No – excludes services |
✅ Conclusion
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CPI is a consumer-centric indicator, reflecting cost of living and how inflation impacts household expenses.
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WPI reflects wholesale price trends, offering insight into early-stage inflation before it reaches consumers.
🔍 Both CPI and WPI are critical tools for policymakers, economists, and businesses to monitor and manage inflation effectively — though they measure different stages in the economic price chain.