Wholesale Price Index

Wholesale price index is the index measuring the change in the aggregate wholesale price of a large number of commodities in the primary market expressed as a percentage of this price in some base period.
Wholesale Price Index measures and tracks the changes in price of goods in the stages before the retail level i.e. at stages at which retailer (shopkeeper) deals with the distributor or with the company directly. Wholesale price indexes (WPIs) report monthly to show the average price changes of goods sold in bulk, and they are a group of the indicators that follow growth in the economy.

Some countries like India and Philippines use the changes in this index to measure inflation in their economies. The Indian WPI figure was earlier released weekly on every Thursday and influenced stock and fixed price markets. The Indian WPI is now updated on a monthly basis. The Wholesale Price Index focuses on the price of goods traded between corporations or at the bulk or wholesale level, rather than goods bought by consumers, which is measured by the Consumer Price Index.

Wholesale Price Index is key parameter which indicates the inflation and buying power of people in economy. The main purpose of having such index is that it helps to monitor price movements in the economy which directly reflect supply and demand in industry, manufacturing and construction. This helps in analyzing both macroeconomic and microeconomic conditions. The wholesale price index (WPI) is based on the wholesale price of a few relevant commodities of over 240 commodities available. The commodities chosen for the calculation are based on their importance in the region and the point of time the WPI is employed.

Below are the various methods used to calculated the WPI:

Laspeyres Formula (also know as the relative method): This is the weighted arithmetic mean based on the fixed value-based weights for the base period.

Ten-Day Price Index: This calculation takes "sample prices" with high intra-month fluctuations and selects them to be surveyed every ten days through phone. Using the data retrieved by this procedure and with the assumption that other non-surveyed "sample prices" remain unchanged, a "ten-day price index" is compiled and released.

Calculation Method: Monthly price indexes are compiled by calculating the simple arithmetic mean of three ten-day “sample prices” in the month.