OFFICIAL STATISTICS SPECIALLY DESIGNED FOR INDIAN STATISTICAL SERVICE (ISS) AND OTHER GOVERNMENT & PRIVATE SECTOR STATISTICAL EXAMINATIONS
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When the news says "wholesale inflation rose to 2.6% this month," that number comes from the Wholesale Price Index (WPI). It is a core price index of the Indian economy and a regular in Indian Statistical Service (ISS) papers. It also shows up in RBI, NABARD, SSC and university statistics exams. Because WPI is compiled by a different office than the CPI and the IIP, it is a favourite for tricky "who compiles it" questions. This guide gives you the concept, the methodology and three exam-style questions.
1. What is the Wholesale Price Index?
The WPI measures the average change in the prices of goods traded in bulk at the wholesale stage, compared with a base year. If the index is 150 and the base year is 100, wholesale prices are 50% higher than in the base year. It covers goods only, not services.
Why examiners love this topic
WPI links index number theory, weighting, base revision and inflation measurement. It is also used as a deflator, for example to convert value data into volume in the IIP, so questions often connect it with other indicators.
2. Who compiles WPI in India and how?
The Office of the Economic Adviser (OEA), DPIIT, Ministry of Commerce and Industry compiles WPI, not MoSPI. It is released monthly, around the 14th of the following month. The current series has 2011-12 as the base year and covers 697 items. Prices are collected from manufacturers and other reporting units, and they exclude indirect taxes.
Basket
697 items in three major groups: Primary Articles, Fuel and Power, and Manufactured Products.
Weights
Based on the value of production and imports, so that each item carries its share of the wholesale market.
Method
A Laspeyres-type index with fixed base-year weights. Elementary indices use the geometric mean.
Exam tip
WPI and CPI answer different questions. WPI tracks wholesale prices of goods, while CPI tracks what households pay at the retail level, including services. The RBI's inflation target is set on CPI. A revision of the WPI base is under way, so check the latest OEA release before your exam.
3. The formula behind WPI
WPI is a Laspeyres-type price index: weights are fixed at the base period, and only prices change.
Here Ii is the price index of the i-th item or group, Wi is its weight, and Pi0, Pi1 are base and current prices. Wholesale inflation is the year-on-year percentage change: (WPIt − WPIt−12) / WPIt−12 × 100.
- Strength: timely, covers the early stage of the supply chain and is a useful deflator.
- Weakness: fixed weights age over time, and it leaves out services, which is why the base is revised.
- Property to remember: it is a price index, so it is the opposite of IIP, which is a quantity index.
4. WPI weights at a glance (Base 2011-12)
Manufactured products carry almost two-thirds of the total weight, so factory-gate prices drive the headline number more than food or fuel do.
Weights are for the 2011-12 base series (total = 100). Food articles and non-food articles are part of Primary Articles; food products are part of Manufactured Products. Verify against the latest OEA release before quoting.
5. Old series vs new series: the comparison that keeps coming up
| Basis | Old series | New series |
|---|---|---|
| Base year | 2004-05 | 2011-12 |
| Number of items | 676 | 697 |
| Primary Articles weight | 20.12 | 22.62 |
| Fuel and Power weight | 14.91 | 13.15 |
| Manufactured Products weight | 64.97 | 64.23 |
| Prices | Included indirect taxes | Exclude indirect taxes |
| Elementary index | Arithmetic mean | Geometric mean |
6. Common mistakes students make
- Saying WPI is compiled by MoSPI. It is compiled by the Office of the Economic Adviser, DPIIT.
- Calling WPI a measure of the cost of living. That is CPI, which uses retail prices and includes services.
- Forgetting that WPI has no service prices.
- Quoting weights from the 2004-05 series for the current series.
- Confusing WPI (price index) with IIP (quantity index). Both are Laspeyres-type, but they measure different things.
7. Three important questions on WPI
Try each one on your own first, then tap the answer.
What does the Wholesale Price Index measure, and which three major groups does it cover in the 2011-12 series?
Show answer
WPI measures the average change in the wholesale prices of goods relative to a base period. It is a Laspeyres-type index with fixed base-year weights. The three major groups are Primary Articles (22.62), Fuel and Power (13.15) and Manufactured Products (64.23). Services are not covered.
The group weights in the 2011-12 series are 22.62 (Primary Articles), 13.15 (Fuel and Power) and 64.23 (Manufactured Products). For a month the group indices are 195.0, 158.0 and 141.0. Compute the all-commodities WPI. If the index for the same month last year was 143.0, find the rate of wholesale inflation.
Show answer
ΣWiIi = (22.62×195.0) + (13.15×158.0) + (64.23×141.0)
= 4410.90 + 2077.70 + 9056.43 = 15545.03
ΣWi = 100, so WPI = 15545.03 / 100 = 155.45 (approx.)
Inflation = (155.45 − 143.0) / 143.0 × 100 = 8.7% (approx.) year on year.
Distinguish between the Wholesale Price Index and the Consumer Price Index. Why are the two indices likely to move differently?
Show answer
Write your answer in four parts. (a) Purpose and compiler: WPI is compiled by the Office of the Economic Adviser, DPIIT, and tracks price movements at the wholesale stage. CPI is compiled by NSO, MoSPI, and measures the change in prices paid by households. (b) Coverage: WPI covers only goods and excludes services and indirect taxes. CPI covers goods and services at retail prices, including taxes. (c) Weights: WPI weights come from the value of production and imports, while CPI weights come from household consumption expenditure. Food has a much higher weight in CPI. (d) Movement: because of these differences, a fuel or metals price shock shows up strongly in WPI, while food and services drive CPI. Conclude that the two indices are complements, and neither is a substitute for the other.
Key takeaways
- WPI is a price index of goods at the wholesale stage, compiled monthly by the Office of the Economic Adviser, DPIIT.
- The current series has base year 2011-12 and 697 items, with manufactured products at about 64% of the weight.
- It follows the Laspeyres approach: fixed base-year weights, with the geometric mean at the elementary level.
- Know the WPI versus CPI comparison cold. It is a likely exam question this year.
Everything on Official Statistics, in one book
This topic is just one chapter of the syllabus. If you want the complete picture, this book is built for you.
- Indian official statistical system: MoSPI, NSO, NSC and the data they produce
- National accounts, GDP, IIP, price indices and labour statistics
- NSS surveys, sampling designs and data quality concepts
- Written specially for the ISS exam, and useful for other government and private sector statistical exams
- Concept-focused notes to revise quickly before the exam
Official Statistics for ISS and other Government & Private Sector Statistical Examinations