The document explains the difference between the Wholesale Price Index (WPI) and the Consumer Price Index (CPI), two important metrics for understanding inflation. WPI measures the average change in prices of commodities at the wholesale level, while CPI tracks price changes of goods and services at the consumer level. Current rates indicate moderate increases in wholesale prices (WPI at 2.36%) and significant increases in consumer prices (CPI at 6.21%), highlighting their respective impacts on trade policies and household budgets.

1. Difference Between WPI & CPI
Understanding Inflation
Metrics Simplified

2. Introduction to Inflation
• What is Inflation?
• Key Points:
• Inflation reflects the increase in prices of
goods/services over time.
• It leads to the erosion of spending power or the
purchasing power of money.
• Inflation plays a critical role in financial planning
and goal achievement.

3. What is WPI?
• Wholesale Price Index (WPI)
• Definition:
– Measures the average change in the prices of commodities traded in
bulk.
– Tracks wholesale prices before goods reach retail consumers.
• Purpose:
– Used for trade, fiscal, and economic policy formulation.
• Components:
– Weighted basket of commodities:
• Primary articles: food, non-food articles, minerals, crude petroleum & natural
gas.
• Fuel & power: coal, mineral oil, electricity.
• Manufactured products: textiles, chemicals, pharmaceuticals, machinery, etc.

4. What is CPI?
• Consumer Price Index (CPI)
• Definition: Measures the rise or fall in the prices of
goods and services used by consumers/households.
• Purpose: A key tool for maintaining price stability by the
government and central bank.
• Components: Weighted basket of household items:
– Food & beverages, apparel, housing, education,
medical care, transport, etc.

5. Key Differences Between WPI & CPI

6. Importance of Understanding WPI and
CPI
• Title: Why Should You Care?
• Key Points:
• WPI helps policymakers craft trade and fiscal
policies.
• CPI affects household budgets and cost of living.
• Both indicators play a role in adjusting salaries,
pensions, and interest rates.

7. Current Trends (October 2024)
• WPI Rate: 2.36%
• Indicates moderate price increase at the wholesale
level.
• CPI Rate: 6.21%
• Indicates significant price increase at the
consumer level, reflecting inflation felt by
households.

8. WPI vs CPI: A Summary
• Key Takeaways:
• WPI focuses on wholesale markets; CPI
focuses on retail consumers.
• CPI has a broader scope as it includes services
along with goods.
• Both indices are crucial for understanding
inflation's impact on different economic levels.