The Wholesale Price Index (WPI) and the Consumer Price Index (CPI) are two important measures for determining the prices of goods and services in an economy.

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In addition, both the WPI and the CPI are used to measure inflation. As a result, while both terms are frequently used to communicate the same meaning, they are extremely distinct.

The Consumer Price Index (CPI) measures the change in retail prices of basic goods and services purchased by households.

Also Read| What is Consumer Price Index (CPI)?

The index tracks these prices at the item level and their rural and urban price movements, as well as the price movement of the total basket of goods and services at the rural, urban, and all-India levels.

While the Wholesale Price Index (WPI) measures changes in the average prices of goods sold in bulk and transacted between businesses or entities rather than goods purchased by consumers. 

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The WPI is known as the wholesale inflation rate, whereas the CPI is known as the retail inflation rate.

WPI and CPI are both price indexes. To put it another way, there are two distinct baskets of goods and services. Based on what is important to those two sorts of consumers, the government allocates different weights to different goods and services.

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The Ministry of Statistics and Programme Implementation (MoSPI) compiles CPI-based inflation statistics, whereas the Economic Advisor at the Ministry of Commerce and Industry compiles WPI-based inflation data.

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The WPI is dominated by manufactured goods prices, whereas the CPI is dominated by food costs. As a result, if food costs rise dramatically, the retail inflation rate will rise significantly more than the wholesale inflation rate.

When the prices of manufactured goods (such as televisions and automobiles) skyrocket, the opposite will occur.

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A crucial difference is that the WPI does not account for changes in the pricing of services like haircuts or banking transactions. However, the CPI does.

If services such as transportation, education, recreation and amusement, personal care, and so on become much more expensive, retail inflation will rise while wholesale price inflation will remain unaffected.