Why in the News?
India’s inflation indicators have shown a significant downward trend, with the Consumer Price Index (CPI) dropping to a 77-month low of 2.1% in June 2025, and the Wholesale Price Index (WPI) contracting by -0.13%, marking its first decline in 20 months.
Key Highlights on Inflation (June 2025):
- Consumer Price Index (CPI) inflation dropped to 2.1%, the lowest in 77 months (since January 2019).
- Wholesale Price Index (WPI) contracted by -0.13%, marking its first decline in 20 months.
- Food and Beverages (CPI component) registered deflation of 0.2%, after being at 8.4% in June 2024.
- WPI Food Articles saw a sharp fall of 3.75%, compared to 11.1% inflation in June 2024.
- Crude Petroleum and Natural Gas (WPI) prices contracted by 12.3%, the 10th straight month of decline.
- Inflation in Fuel and Light (CPI) eased to 2.55% (from 2.8% in May 2025).
- Housing inflation increased marginally to 3.24%, while Pan, Tobacco and Intoxicants stayed stable at 2.4%.
Back2Basics: Consumer Price Index (CPI) vs. Wholesale Price Index (WPI)
| Consumer Price Index (CPI) | Wholesale Price Index (WPI) | |
| Definition | Measures the change in retail prices of goods and services consumed by households | Measures the change in wholesale prices of goods traded between businesses |
| Compiled By | National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI) | Office of Economic Adviser, Ministry of Commerce and Industry |
| Base Year | 2012 (CPI-Industrial Workers has 2016 as base year) | 2011–12 |
| Coverage | Goods and Services | Only Goods |
| Data Collection | Prices from 1,181 villages & 1,114 urban markets across India | Prices collected from wholesale markets, factories, and mandis |
| Purpose/Use | Measures retail inflation, used for the RBI’s inflation targeting and monetary policy decisions | Measures producer-level inflation, used as a GDP deflator |
| Users | Consumers, RBI, Government (for social welfare schemes like DA/DR) | Policymakers, manufacturers, and financial markets |
| Publication Frequency | Monthly | Monthly |
| Number of Items | 299 items | 697 items |
| Components | – Food & Beverages (45%) – Housing (10%) – Fuel & Light (6.8%) – Miscellaneous (services, etc.) (28.3%) – Clothing & Footwear (6.5%) – Pan, Tobacco & Intoxicants (2.4%) |
– Primary Articles (22.6%) – Fuel & Power (13.2%) – Manufactured Products (64.2%) |
| Weight of Food Items | High (~45%) | Lower (~24.4%) |
| Impact on Economy | Direct impact on consumer purchasing power and cost of living | Indicates trends in production costs and supply chain |
| Volatility | More volatile due to food and fuel price changes | Less volatile due to base price considerations |
| Use in Policy | Directly used by RBI for inflation targeting (e.g., 4% CPI target) | Used for GDP deflation, price policy formation |
| Criticism | May not reflect production-side price pressures | Does not capture consumer-level inflation or services |
| Inflation Indicator | Preferred indicator for common people | More relevant to manufacturers and wholesale traders |
| [UPSC 2021] With reference to the Indian economy, demand-pull inflation can be caused or increased by which of the following:
1. Expansionary policies 2.Fiscal stimulus 3.Inflation-indexing of wages 4.Higher purchasing power 5.Rising interest rates Select the correct answer using the code given below: Options: (a) 1, 2, and 4 only* (b) 3, 4, and 5 only (c) 1, 2, 3, and 5 only (d) 1, 2, 3, 4, and 5 |
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