CPI and WPI both measure prices, but not at the same point and not for the same basket. The Consumer Price Index follows what households pay, and it includes services. The Wholesale Price Index follows the first bulk price of goods, before retail margin, and it leaves services out. Since 2014 the RBI has targeted CPI-Combined, not WPI.
Difference between CPI and WPI
| Feature | CPI | WPI |
|---|---|---|
| Meaning | Prices households pay | First bulk price of goods |
| Basket | Goods and services | Goods only |
| Publisher | NSO, Ministry of Statistics | Office of the Economic Adviser, Commerce Ministry |
| Weight | Food and beverages about 45% | Manufactured products about 64% |
| Release | Monthly, for rural, urban, and combined | Monthly |
| Policy | RBI target of 4% plus or minus 2% on CPI-Combined | Not the monetary policy anchor since 2014 |
At a glance
Whose price
The household, at retail
The producer or the mandi, in bulk
Services
Included
Left out
Who uses it
RBI's inflation target (CPI-Combined)
A check on industry costs
Base year
2012
2011-12
Example
Onion prices at the mandi and at the shop
Mandi onion prices crash, so WPI falls. The shop still charges ₹40 a kilo because transport and the middleman have not cheapened. CPI stays high. A reader who only watches WPI will think inflation has cooled while households are still paying the old retail price. Services such as rent and a doctor's visit never enter WPI at all. They do enter CPI.
What this means for the exam
WPI can fall while CPI stays high. Services are in CPI only. RBI watches CPI-Combined.
CPI
CPI is the cost-of-living index. It records the final price a consumer pays, including food, housing, health, education, and transport. NSO publishes CPI-Rural, CPI-Urban, and CPI-Combined every month. Food and beverages carry about 45% of the weight, which is why a vegetable spike moves the headline number.
The Urjit Patel Committee in 2014 recommended a shift away from WPI. RBI now targets CPI-Combined at 4%, with a band of 2 percentage points on either side. Services such as health, education, and housing are in that basket, so the target follows the prices people actually face.
WPI
WPI records the first bulk transaction in goods: what a factory or a mandi charged before branding, transport, and the shopkeeper's margin. The Office of the Economic Adviser publishes it monthly. Manufactured products are about 64% of the weight. Telecom, banking, rent, and a clinic visit are not in it.
A gap between the two indexes is normal. If WPI rises faster than CPI, producers may be absorbing costs. If CPI stays high while WPI falls, the retail chain has not passed the cheaper bulk price on. Neither number is a mistake. They measure different stages. The exam error is to treat WPI as the index RBI uses today.
Key takeaway
CPI is what households pay, including services. WPI is the bulk price of goods only. RBI targets CPI-Combined.
Difference between CPI and WPI FAQs
What is CPI?
The Consumer Price Index tracks the prices households pay for a basket of goods and services. NSO publishes it monthly. RBI's inflation target uses CPI-Combined.
What is WPI?
The Wholesale Price Index tracks bulk prices of goods at the first transaction, before retail margins. The Office of the Economic Adviser publishes it. Services are not included.
What is the main difference between CPI and WPI?
CPI is the retail price households pay, including services. WPI is the bulk price of goods only. RBI targets CPI, not WPI.
Does WPI include services?
No. WPI covers goods. Telecom, banking, health, and housing are in CPI, not in WPI.
Which index does the RBI use for inflation targeting?
CPI-Combined. The target is 4%, with a tolerance of 2 percentage points on either side. WPI stopped being the policy anchor after 2014.
Can WPI fall while CPI stays high?
Yes. Bulk prices can drop at the mandi while transport and retail margins keep the shop price up. CPI records the shop price.
PYQ linkage
(1) WPI only includes goods, not services. (2) CPI-Combined is used by RBI for inflation targeting. Which is/are correct?