What is Wholesale Price Index and why is it so important?

Asked by: Stanley Wishon

Key Takeaways. A wholesale price index (WPI) measures and tracks the changes in the price of goods before they reach consumers: goods that are sold in bulk and traded between entities or businesses (rather than consumers). Wholesale price indexes (WPIs) are one indicator of a country’s level of inflation.

What do you mean by Wholesale Price Index?

Definition: Wholesale Price Index (WPI) represents the price of goods at a wholesale stage i.e. goods that are sold in bulk and traded between organizations instead of consumers. WPI is used as a measure of inflation in some economies. Description: WPI is used as an important measure of inflation in India.

What is a price index and why is it important?

Broadly speaking, the CPI measures the price of consumer goods and how they’re trending. It’s a tool for measuring how the economy as a whole is faring when it comes to inflation or deflation. When planning how you spend or save your money, the CPI can influence your decisions.

What are the advantages of WPI?

The main uses of WPI are the following: to provide estimates of inflation at the wholesale transaction level for the economy as a whole. This helps in timely intervention by the Government to check inflation in particular, in essential commodities, before the price increase spill over to retail prices.

What is WPI and how is it calculated?

WPI= (Current Price / Base Period Price) × 100

Suppose, the total price of goods in the current year (2016) is INR 3,500. To calculate the change in prices, we consider 2010 as the Base Year. The total price of goods in the base year is INR 2,000. Now, with the help of this formula, we will calculate the WPI index.

What happens when WPI increases?

Rise in WPI indicates inflationary pressure in the economy, and vice versa. The extent of rise in WPI is used to measure the level of wholesale inflation in the economy.

How many items are in WPI?

Calculation. The wholesale price index (WPI) is based on the wholesale price of a few relevant commodities of over 240 commodities available.

Why is it important to know consumer price index?

The CPI is often used to adjust consumers’ income payments (for example, Social Security), to adjust income eligibility levels for government assistance, and to automatically provide cost-of-living wage adjustments to millions of American workers.

Why is CPI important to business?

The CPI is widely used by financial market participants to gauge inflation and by the Federal Reserve to calibrate its monetary policy. Businesses and consumers also use the CPI to make informed economic decisions.