Consider the following statements 1 Wholesale Price Index WPI basket does not cover services whereas...........

Indian Economic System(CSC) Inflation

Consider the following statements:

1. Wholesale Price Index (WPI) basket does not cover services whereas Consumer Price Index (CPI) basket consists of services like housing, education and recreation.

2. Weightage of food group is more in CPI basket than in WPI basket.

Which of the statements given above is/are correct?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

Wholesale Price Index (WPI) measures the average change in the prices of commodities for bulk sale at the level of early stage of transactions. Consumer Price Index is a measure of change in retail prices of goods and services consumed by defined population group in a given area with reference to a base year.

Statement 1 is correct. The CPI basket consists of services like housing, education, medical care, recreation etc. which are not part of WPI basket.
A significant proportion of WPI item basket represents manufacturing inputs and intermediate goods like minerals, basic metals, machinery etc. whose prices are influenced by global factors but these are not directly consumed by the households and are not part of the CPI item basket.

Statement 2 is correct. Wholesale Price Index (WPI) Vs Consumer Price Index (CPI): The reasons for the divergence between the two indices can also be partly attributed to the difference in the weight of food group in the two baskets. CPI Food group has a weight of 39.1 per cent as compared to the combined weight of 24.4 per cent (Food articles and Manufactured Food products) in WPI basket.