Previous Year Question
With reference to India, consider the following statements:
The Wholesale Price Index—WPI in India is available on a monthly basis only.
As compared with the Consumer Price Index for Industrial Workers—CPI (IW), the WPI gives less weight to food articles.
Which of the statements given above is/are correct?
1 only
2 only
Both 1 and 2
Neither 1 nor 2
Correct Answer: B
Detailed Solution
The question must be answered according to the WPI and CPI-IW series and publication arrangements applicable in 2010. Applying the present arrangement retrospectively would produce an incorrect answer.
Statement 1 is incorrect
When the question was asked in 2010, India’s WPI was not available only on a monthly basis. Under the then 1993-94 base-year WPI series, the index was published weekly.
Subsequently:
A new WPI series with 2004-05 as the base year was introduced in September 2010.
All Commodities WPI began to be released monthly.
Weekly indices for Primary Articles and Fuel and Power continued temporarily.
The weekly publication was discontinued from January 2012, completing the transition to the monthly system.
Therefore, in the 2010 context, the claim that WPI was available “on a monthly basis only” is incorrect.
The word “only” is decisive.
Statement 2 is correct
CPI-IW measures changes in the retail prices of goods and services consumed by industrial-worker households. Food constitutes a substantial share of the total consumption expenditure of these households.
Under the then CPI-IW series with base year 2001, the Food Group carried a weight of approximately 46.2%.
In comparison, the combined importance of Food Articles and Food Products in the then WPI was substantially lower. The WPI basket reflected the structure of production and wholesale transactions rather than household-consumption patterns.
Thus:
Food Weight in CPI-IW > Food Weight in WPI
Therefore, Statement 2 is correct.
Fundamental distinction between WPI and CPI-IW
Basis | WPI | CPI-IW |
Price level | Wholesale or producer level | Retail level |
Coverage | Goods | Goods and specified services |
Target population | No particular consumer group | Industrial-worker households |
Food weight | Comparatively lower | Comparatively higher |
Compiling institution | Office of Economic Adviser | Labour Bureau |
Present arrangement
The current WPI series with base year 2011-12 is published monthly. However, this present arrangement cannot make Statement 1 correct for a question asked in 2010.
The CPI-IW base year has also subsequently been revised to 2016=100. A historical question must be answered using the series applicable at that time.