Consumer price index:
It is the measure of changes in the price level of a basket of consumer goods and services, both which are bought by households.
CPI is a numerical estimation calculated using the rates of a sample of representative objects the prices of which are gathered periodically.
The CPI calculates changes in prices at the consumer level.
Changes in prices at the producer level are calculated/ monitored by the Wholesale Price Index (WPI).
India has adopted four type CPIs:
CPI (Industrial Workers)
CPI (Urban Non- Manual Employees)
CPI (Agricultural Labour)
CPI (Rural Worker)
To calculate inflation, RBI in India uses CPI (combined) released by CSO with base year as 2012.
The number of items in CPI basket are 448 in rural basket and 460 in urban basket.
The new CPI released in 2017 has these sub-groups:
food and beverages
fuel and light
housing and clothing
bedding and footwear.
WPI: Wholesale Price Index
Wholesale Price Index (WPI) is based on the price prevailing in the wholesale markets i.e. at which bulk transactions are made.
Components of WPI:
Manufactured products: 65% approx (64.2% now)
Primary products: 20% approx (22.6% now)
Fuel and power: 15% approx (13.1% now)
The WPI basket earlier included 676 and now increased to 697 commodities in total.
It is calculated by the Ministry of commerce and industry with base year as 2004-05 (Changed to 2011-12 now).
New WPI Series
Base year was changed from 2004-05 to 2011-12
The number of items were also increased in the new series of the WPI from 676 to 697