Inflation-Wholesale Price Index  

Inflation-Wholesale Price Index

Topic: Economy

Section: Inflation and unemployment

Context:  The retail inflation hit an eight-month high to 6.7% and WPI over 13% in February.

Content:

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. Thus, inflation is a condition of price rise.

Causes of Inflation

There can be two sets of factors that can cause inflation in an economy. They are:

• Demand Pull and Cost Push.
  • Demand Pull Factors
  • Rise in population.
  • Black money.
  • Rise in income.
  • Excessive government expenditure.
• Cost Push Factors
  • Infrastructure bottlenecks which lead to rise in production and distribution costs.
  • Rise in Minimum Support Price (MSP).
  • Rise in international prices.
  • Hoarding and black marketing.
  • Rise in indirect taxes.

Measures of Inflation-

• Consumer Price Index/Retail Inflation–

It measures price changes from the perspective of a retail buyer.

It is released by the National Statistical Office (NSO).

The CPI calculates the difference in the price of commodities and services such as food, medical care, education, electronics etc, which Indian consumers buy for use.

The CPI has several sub-groups including food and beverages, fuel and light, housing and clothing, bedding and footwear.

Four types of CPI are as follows:

• CPI for Industrial Workers (IW).
• CPI for Agricultural Labourer (AL).
• CPI for Rural Labourer (RL).
• CPI (Rural/Urban/Combined).

Of these, the first three are compiled by the Labour Bureau in the Ministry of Labour and Employment. Fourth is compiled by the National Statistical Office (NSO) in the Ministry of Statistics and Programme Implementation.

Base Year for CPI is 2012. The Monetary Policy Committee (MPC) uses CPI data to control inflation. Thus, it is also called headline inflation

• Wholesale Price Index–

It measures the changes in the prices of goods sold and traded in bulk by wholesale businesses to other businesses.

Published by the Office of Economic Adviser, Ministry of Commerce and Industry.

 It is the most widely used inflation indicator in India and measures inflation at wholesale level.

 The base year of All-India WPI has been revised from 2004-05 to 2011-12 in 2017.

The index basket of the WPI covers commodities falling under the three major groups namely Primary Articles, Fuel and Power and Manufactured products. (The index basket of the present 2011-12 series has a total of 697 items including 117 items for Primary Articles, 16 items for Fuel & Power and 564 items for Manufactured Products.)

Know More: WPI Vs CPI