Measures of inflation: Understanding CPI and WPI, and how they differ

The key difference is that one works at the production level, the other at the level of the household; but there are a few other differences as well

Inflation is the increase in the general prices of goods and services in an economy, and indicates the decrease in the purchasing power of a unit of a country’s currency.

Simply put, inflation is when there is a rise in prices and the consequent decline in purchasing power over time.

Notably, a moderate level of inflation is required in the economy to provide a boost to production.

In India, inflation is primarily measured by two main indices: The Wholesale Price Index (WPI) and Consumer Price Index (CPI), also known as retail inflation.

Wholesale Price Index

The index numbers used to