The Wholesale Price Index (WPI) is the price of a representative basket of wholesale goods.

Some countries (like India and The Philippines) use WPI changes as a central measure of inflation. However, India and the United States now report a producer price index instead. The Wholesale Price Index or WPI is the price of a representative basket of wholesale goods. Some countries use the changes in this index to measure inflation in their economies, in particular India The Indian WPI figure is released weekly on every Thursday and influences stock and fixed price markets. The Wholesale Price Index focuses on the price of goods traded between corporations, rather than goods bought by consumers, which is measured by the Consumer Price Index. The purpose of the WPI is to monitor price movements that reflect supply and demand in industry, manufacturing and construction. This helps in analyzing both macroeconomic and microeconomic conditions. Calculation of Wholesale Price Index The wholesale price index consists of over 2,400 commodities. The indicator tracks the price movement of each commodity individually. Based on this individual movement, the WPI is determined through the averaging principle. The following methods are used to compute the WPI: Laspeyres Formula (relative method):It is the weighted arithmetic mean based on the fixed value-based weights for the base period. Ten-Day Price Index: Under this method, sample prices with high intra-month fluctuations are selected and surveyed every ten days through phone. Utilizing the data retrieved by this procedure and with the assumption that other non-surveyed "sample prices" remain unchanged, a "ten-day price index" is compiled and released. Calculation Method: Monthly price indexes are compiled by calculating the simple arithmetic mean of three ten-day sample prices in the month.

In this method, a set of 435 commodities and their price changes are used for the calculation.
The selected commodities are supposed to represent various strata of the economy and are supposed to give a comprehensive WPI value for the economy. WPI is calculated on a base year and WPI for the base year is assumed to be 100. To show the calculation, lets assume the base year to be 1970. The data of wholesale prices of all the 435 commodities in the base year and the time for which WPI is to be calculated is gathered. Let's calculate WPI for the year 1980 for a particular commodity, say wheat. Assume that the price of a kilogram of wheat in 1970 = Rs 5.75 and in 1980 = Rs 6.10 The WPI of wheat for the year 1980 is, (Price of Wheat in 1980 Price of Wheat in 1970)/ Price of Wheat in 1970 x 100 i.e. (6.10 5.75)/5.75 x 100 = 6.09

Since WPI for the base year is assumed as 100, WPI for 1980 will become 100 + 6.09 = 106.09. In this way individual WPI values for the remaining 434 commodities are calculated and then the weighted average of individual WPI figures are found out to arrive at the overall Wholesale Price Index. Commodities are given weight-age depending upon its influence in the economy.

Characteristics of WPI Following are the few characteristics of Wholesale Price Index WPI uses a sample set of 435 commodities for inflation calculation The price from wholesale market is taken for the calculation WPI is available for every week It has a time lag of two weeks, which means WPI of the week two weeks back will be available now

A consumer price index (CPI) measures changes through time in the price level of
consumer goods and services purchased by households. The CPI is defined by the United States Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services."[1] The CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically. Sub-indexes and sub-sub-indexes are computed for different categories and sub-categories of goods and services, being combined to produce the overall index with weights reflecting their shares in the total of the consumer expenditures covered by the index. It is one of several price indices calculated by most national statistical agencies. The annual percentage change in a CPI is used as a measure of inflation. A CPI can be used to index (i.e., adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices and for deflating monetary magnitudes to show changes in real values. In most countries, the CPI is, along with the population census and the USA National Income and Product Accounts, one of the most closely watched national economic statistics. Two basic types of data are needed to construct the CPI: price data and weighting data. The price data are collected for a sample of goods and services from a sample of sales outlets in a sample of locations for a sample of times. The weighting data are estimates of the shares of the different types of expenditure in the total expenditure covered by the index. These weights are usually based upon expenditure data obtained from expenditure surveys for a sample of households or upon estimates of the composition of consumption expenditure in the National Income and Product Accounts. Although some of the sampling of items for price collection is done using a sampling frame and probabilistic sampling methods, many items and outlets are chosen in a commonsense way (purposive sampling) that does not permit estimation of confidence intervals.

Therefore, the sampling variance cannot be calculated. In any case, a single estimate is required in most of the purposes for which the index is used. The index is usually computed monthly, or quarterly in some countries, as a weighted average of sub-indices for different components of consumer expenditure, such as food, housing, clothing, each of which is in turn a weighted average of sub-sub-indices.

Calculating the CPI for a single item

Where 1 is usually the comparison year and CPI1 is usually an index of 100.

Alternately, the CPI can be performed as . The "updated cost" is the price of an item at a given year (say, the price of bread in 1982), divided by the initial year (the price of bread in 1970), multiplied by one hundred.[2]

Calculating the CPI for multiple items

Example: The prices of 95,000 items from 22,000 stores, and 35,000 rental units are added together and averaged. They are weighted this way: Housing: 41.4%, Food and Beverage: 17.4%, Transport: 17.0%, Medical Care: 6.9%, Other: 6.9%, Apparel: 6.0%, Entertainment: 4.4%. Taxes (43%) are not included in CPI computation.[3]