Consider the following statements:
1. WPI measure price rise at the wholesale level where wholesale means sale in large quantities and meant for resale.
2.Producer Price Index means the prices of goods as they are sold to the whole sales by the producers.
3. The price of electricity in the CPI is the Industrial tariff & not the consumer tariff.
Response:
Consider the following statements:
1. WPI measure price rise at the wholesale level where wholesale means sale in large quantities and meant for resale.
2.Producer Price Index means the prices of goods as they are sold to the whole sales by the producers.
3. The price of electricity in the CPI is the Industrial tariff & not the consumer tariff.
Response:
The correct option is A Only 1 & 2 are correct
The Producer Price Index (PPI) is a weighted index of prices measured at the wholesale, or producer level. A monthly release from the Bureau of Labor Statistics (BLS), the PPI shows trends within the wholesale markets (the PPI was once called the Wholesale Price Index), manufacturing industries and commodities markets. All of the physical goods-producing industries that make up the U.S. economy are included, but imports are not.
Wholesale Price Index (WPI)
This index is published by office of Economic Adviser (Ministry of Commerce & Industry).The calculation is done by tracking the average prices of commodities that are traded in bulk i.e. wholesale.
The commodities under study are divided into three categories: primary articles (food, non-food, tobacco, fodder and minerals), fuel & power and manufactured products. Currently, the total basket of products under consideration for WPI is 676 items and the calculation of this index is done by using Laspeyres formula (it works on averaging principle) and year (2004-2005) commodity prices are taken as base for reference by equating them to 100 and values of the index are calculated as a percentage relative to this base.
Consumer Price Index (CPI)
This index is published by Central Statistics Office (CSO) (Ministry of Statistics and Programme Implementation).In nations like United Kingdom, Poland, Malaysia etc. it is also known as Retail Price Index. CPI is a method that involves calculation of inflation through time tracking of weighted averages of 200 consumer goods and services with prices of year 2010 as the base.
So which is the better index for measuring inflation?
The primary disapproval for WPI being used as the key index for estimating inflation is that the general public doesn’t transact on wholesale level on a daily basis. Also, the wholesale doesn’t reflect the pricing trends at retail level and thus, not the definitive ideal indicator of inflation.
On the other hand, many analysts feel that CPI is the accurate method of measuring inflation since it reflects the ground realities by tracking the costs of the goods that are purchased on daily basis by general public.
The difference between Wholesale Price Index (WPI) and Consumer Price Index (CPI) is that along with tracking prices of goods, the latter also includes services in the indexing.
Most of the countries use CPI as the measuring index since it represents actual variation in prices of the items that a consumer will ultimately make use of. Also, CPI has an updated base in comparison to WPI.
Earlier, RBI had given more weightage to WPI as a measurement index. However, on April 2, 2014 during the first bimonthly monetary policy for FY2014-15, Mr. Rajan (RBI governor) declared that CPI would be the key index of inflation measurement going forward.
Only 1 & 2 are correct
The Producer Price Index (PPI) is a weighted index of prices measured at the wholesale, or producer level. A monthly release from the Bureau of Labor Statistics (BLS), the PPI shows trends within the wholesale markets (the PPI was once called the Wholesale Price Index), manufacturing industries and commodities markets. All of the physical goods-producing industries that make up the U.S. economy are included, but imports are not.
Wholesale Price Index (WPI)
This index is published by office of Economic Adviser (Ministry of Commerce & Industry).The calculation is done by tracking the average prices of commodities that are traded in bulk i.e. wholesale.
The commodities under study are divided into three categories: primary articles (food, non-food, tobacco, fodder and minerals), fuel & power and manufactured products. Currently, the total basket of products under consideration for WPI is 676 items and the calculation of this index is done by using Laspeyres formula (it works on averaging principle) and year (2004-2005) commodity prices are taken as base for reference by equating them to 100 and values of the index are calculated as a percentage relative to this base.
Consumer Price Index (CPI)
This index is published by Central Statistics Office (CSO) (Ministry of Statistics and Programme Implementation).In nations like United Kingdom, Poland, Malaysia etc. it is also known as Retail Price Index. CPI is a method that involves calculation of inflation through time tracking of weighted averages of 200 consumer goods and services with prices of year 2010 as the base.
So which is the better index for measuring inflation?
The primary disapproval for WPI being used as the key index for estimating inflation is that the general public doesn’t transact on wholesale level on a daily basis. Also, the wholesale doesn’t reflect the pricing trends at retail level and thus, not the definitive ideal indicator of inflation.
On the other hand, many analysts feel that CPI is the accurate method of measuring inflation since it reflects the ground realities by tracking the costs of the goods that are purchased on daily basis by general public.
The difference between Wholesale Price Index (WPI) and Consumer Price Index (CPI) is that along with tracking prices of goods, the latter also includes services in the indexing.
Most of the countries use CPI as the measuring index since it represents actual variation in prices of the items that a consumer will ultimately make use of. Also, CPI has an updated base in comparison to WPI.
Earlier, RBI had given more weightage to WPI as a measurement index. However, on April 2, 2014 during the first bimonthly monetary policy for FY2014-15, Mr. Rajan (RBI governor) declared that CPI would be the key index of inflation measurement going forward.
