WPI and CPI: why India has two inflation numbers, and why they are so far apart

What do the two indices measure?

The CPI measures what you pay at the counter; the WPI measures what goods cost when they change hands in bulk, before they reach a shop.

The Consumer Price Index follows a fixed basket of things households buy, from rice and onions to school fees, rent, phone bills and haircuts. Its prices are collected from markets and shops across towns and villages. It is compiled by the National Statistics Office under the Ministry of Statistics, and since February 2026 it has used a new base year of 2024.

The Wholesale Price Index is compiled by the Office of the Economic Adviser in the commerce and industry ministry. It tracks the prices that producers and bulk sellers charge for goods: crops, minerals, fuel and factory products such as steel, chemicals and cloth.

What changed in the WPI this year?

In June the government moved the WPI to a new base year, 2022-23, replacing the 2011-12 series.

The basket grew from 697 items to 957. Weights are now based on the total value of what the economy produces rather than on traded value, and prices are recorded at basic prices, which leave out taxes and trade and transport margins. The same office also launched a Producer Price Index alongside it. The WPI will run in parallel for five years and is then meant to be retired in favour of the producer index.

Figures are released at noon on the 14th of each month, or the next working day.

The two indices at a glance

• 14.11%weight of fuel and power in the new WPI
• 63.13%weight of manufactured products in the WPI
• 36.75%weight of food and beverages in the new CPI
• Noneservices in the WPI basket; the CPI includes them

Why is wholesale inflation so much higher right now?

Because the WPI leans far more heavily on fuel and factory goods, and those are exactly the prices the West Asia war has pushed up.

In August, fuel and power prices in the WPI were 22.93% higher than a year earlier. Manufactured products rose 8.37%. Brent crude has stayed above $100 a barrel for most of the year, and the rupee is close to 97 to the dollar, which makes every imported barrel and raw material dearer.

The CPI feels these costs too, but they are diluted. A large part of the household budget goes on services such as rent, education and health, which the WPI does not count at all. Petrol and diesel prices at the pump have also been raised only in steps, so households have not yet felt the full rise that refiners and factories have.

The result is a gap of more than four percentage points: 9.92% wholesale in August against 4.83% retail that month, and 5.54% retail in September.

Does the WPI tell us where retail prices are going?

Often, yes, though not one for one.

Wholesale prices are costs for businesses. When a fertiliser maker, a transporter or a biscuit company pays more for fuel and inputs for several months, some of that usually reaches shop shelves later. That is why economists watch the WPI as an early signal. Devendra Pant of India Ratings and Research has pointed out that seven manufacturing groups, including textiles, chemicals and base metals, had double-digit inflation in August, a sign that the pressure is spreading beyond fuel.

How much passes through depends on demand, competition and how much margin companies are willing to give up.

Which number does the RBI care about?

The CPI. The Reserve Bank’s legal target is retail inflation of 4%, with a band of 2% to 6%. It raised the repo rate to 5.50% on 7 October and expects retail inflation to reach about 6% in October-December.

The WPI still matters to it, because a sustained rise in producer costs is one of the ways retail inflation gets locked in.

Who else uses the WPI?

Businesses and the government, more than households.

Many long-term supply and construction contracts include price escalation clauses linked to wholesale indices. Statisticians use wholesale prices to strip out inflation from parts of the GDP estimates. Companies use it to benchmark what they pay for raw materials.

What to watch at noon today

Whether September wholesale inflation crosses 10%. India Ratings has forecast 10.2%. A reading in double digits would confirm that cost pressure in the pipeline is still building, even before the festive season and the winter months that the RBI already expects to be the peak for retail prices.