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What Is WPI?
One notices in the WPI the components include food products and fuel just as in the consumer price index. In addition one notices leather goods, transport equipment, Industrial Machinery, Sugar, Edible Oils, Rubber, Paper Products, Plastics, Chemicals, Iron and Steel, Cement, Wood and so on.WPI is most widely used in India and includes a measure of components used in Industries .Even though this index is widely used CPI gives a true measure of the rise in retail prices in Society. The WPI is updated every week. It uses 435 commodities while calculating the inflation. The latest WPI is a measure of prices of components about two weeks back. Housing is not reflected in this index and this cannot be a true measure of inflation in society.
How Is WPI Calculated?
One has the formula (WPI at the end of the year-WPI at the beginning of the year)/ (WPI at the beginning of the year) * 100.Let us assume the WPI value on January 1st 2010 is 130.The value on January 1st 2011 was 142. One has 142-130/130 * 100 = 9.2%.Thus one can say the inflation for the Year 2011 was 9.2%.
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