UPSC Prelims 2010 Q86: Indian Economy – Inflation & Price Indices
With reference to India, consider the following statements:
1. The Wholesale Price Index (WPI) in India is available on a monthly basis only.
2. As compared to 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?
- (a) 1 only
- (b) 2 only
- (c) Both 1 and 2
- (d) Neither 1 nor 2
Answer: (c) Both 1 and 2
Explanation
WPI vs CPI(IW): checking two statements
The Wholesale Price Index (WPI) and Consumer Price Index for Industrial Workers (CPI-IW) differ in both their release pattern and basket composition.
| Statement | Verdict | Reason |
|---|---|---|
| 1. WPI is available only on a monthly basis | Correct | At the time of this question, India's WPI had moved to a monthly release basis (an older weekly series existed much earlier but was discontinued/superseded), so this is treated as accurate |
| 2. WPI gives less weight to food articles than CPI(IW) | Correct | WPI's basket is weighted more toward manufactured goods/commodities broadly, while CPI(IW), reflecting industrial workers' consumption, gives much greater weight to food articles |
WPI vs CPI(IW):
| Point | WPI | CPI(IW) |
|---|---|---|
| Release frequency | Monthly | Monthly |
| Food weight | Lower | Higher |
Answer: (c) Both 1 and 2.
Why each option is right or wrong
- (a) Incorrect. Statement 2 (less weight to food) is also correct, so '1 only' is incomplete.
- (b) Incorrect. Statement 1 (monthly-only release) is also correct, so '2 only' is incomplete.
- (c) CORRECT. Both the monthly-only release pattern and the lower food-article weighting in WPI (compared to CPI-IW) are accurate.
- (d) Incorrect. Since both statements are accurate, 'neither' is wrong.
Key point
WPI is released on a monthly basis, AND it gives less weight to food articles than CPI(IW), which reflects industrial workers' heavier food-spending share — both statements hold true.
Remember
WPI: released monthly, and gives LESS weight to food articles than CPI(IW) — both statements about WPI are correct.
Common mistakes
- Assuming WPI's release frequency contradicts the monthly-only claim, missing the move away from any older weekly series.
- Not knowing the weighting difference in food articles between WPI and CPI(IW) baskets.
- Confusing the purpose/basket composition of these two distinct price indices.
Exam tip
WPI's basket skews toward manufactured goods (lower food weight) and is released monthly; CPI(IW)'s basket skews toward worker consumption (higher food weight).
Sources
- Office of the Economic Adviser, Ministry of Commerce and Industry — Wholesale Price Index methodology
- Labour Bureau, Government of India — CPI(IW) methodology and weighting