India's two main families of price indices: the Consumer Price Index, which tracks the retail cost of a fixed basket of goods and services bought by households, and the Wholesale Price Index, which tracks prices at the first point of bulk sale of goods; they are built differently and often move apart.
Deep-dive lesson:Money, Banking and Inflation. This page is a quick reference that connects the term across subjects; read the lesson for the full treatment.
A price index answers a simple question: how much more or less does the same set of purchases cost today than it did in a chosen base period? Building one involves four decisions: whose purchases to track, which items go into the basket, how much weight each item gets, and where and how often prices are collected. Indian price statistics have evolved by changing each of these decisions.
For decades the WPI was the headline measure. It was available quickly and covered a wide range of commodities, including industrial raw materials and manufactured goods, which suited a planning era focused on production. Several narrower CPIs existed for specific groups, such as industrial workers, agricultural labourers and rural labourers, mainly to adjust wages and allowances. A broad all-India CPI covering rural and urban households was introduced only in 2011. Its arrival, and the decision in 2014–16 to use CPI as the anchor for monetary policy, changed which index mattered most. This page explains how these indices are put together and why they diverge, while the separate inflation entry covers causes and policy.
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