Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Charts & Analysis

The Wholesale Price Index Can’t Be Trusted

The wholesale price index (WPI) comes to you every month, and we tend to analyse its implications based on change from last year, or last month, or whatever. But the index collection mechanism has its problems, with a very large number of items not having updated prices every month!

You don’t expect every single price to change every month. However to see that too many items in the index remain unchanged is scary. Take a look at the number of items that haven’t changed in price:

Unchanged Items in the WPI

This tells you a story. Nearly 24% of the index hasn’t been changed for a month, which means they’ll change in later months. About 6.7% of the index weight, and 90 items, haven’t changed in price for six months!

Does this mean these items are not impacted by inflation?

In some cases, this statement is probably true, like in the case of pencils. But the more likely explanation is: Are you bullshitting me?

This is just invalid data collection. I think they don’t update prices of many commodities because they either don’t collect the data, or the data they collect is flawed.

The items that haven’t seen price increases for a long time include:

  • Raw wool (47 months). This was one of the NSEL traded commodities, and raw wool prices have evidently gone up a lot recently. Yet, this price hasn’t been updated since November 2009. Is the WPI correct, or have we been shearing a lot more sheep recently?
  • Coke (30 months) (the stuff that’s burnt, not drunk). This is a globally traded commodity but I think the WPI takes prices from Coal India, once a year or something. Even then, for prices not to have changed since March 2011 raises an eyebrow.
  • Computer Peripherals (12+ months), Computers (4 months): This is funny, because prices change nearly every day.
  • Shampoo (11 months)
  • Lubricants (8 months)

I could go on, but this is scary indeed. Price updates are not coming in regularly. About 3% of the index, in weight, has not seen a price change in a year, and some items as long as 4 years.

This might be a good reason that the WPI Inflation (6%) is so disconnected from the Consumer Price Index (CPI) which is at 9%+.

WPI versus CPI

We can’t really trust the WPI anymore.

  • Vamsy says:

    The solution is simple: change CPI!

  • mangoman2012 says:

    can we write as a group to RBI Governor? I am very serious about this as the scams are now touching the data and all that..
    why we should pay for somebody’s election ambitions?

  • Paul says:

    Though I am also frustrated by the fact, it makes me think on another line. WPI is “wholesale price index”. It could also be that the wholesale prices are not changing as much as the retail ones? For computer peripherals and computers, I am very sure that the WPI price is way lower than CPI. A Dell machine sold from Dell to a small business cost him Rs.60K, while the same machine purchased from a wholesaler set him back just 36K! Same was the case for almost all computer peripherals. For shampoo also, most wholesale rates dont wary too much. This is also true for cement(at least for some local companies). A contractor is till getting cement from a wholesaler at rates I cant imagine(Rs.250 per bag at site!) – Not too sure of quality though, but none of his buildings have yet collapsed! I buy the same cement bag for Rs. 315/- + transportation + loading/unloading charges.
    So the reported data doesn’t look too bad. Looks like Inflation seems to be affecting only people(retail) and not business or big guys!

  • Getafix says:

    Wool prices in the last 4 years have risen by 80-100% depending upon the quality.
    Both WPI and CPI are bull crap indexes meant to do nothing but pull the wool over us poor Indians.

  • Arvind says:

    Deepak: Nice find and analysis. A premier institution dealing with such an important data point like WPI does such a poor job. Unbelievable!
    Reading your above post, I emailed them and got a reply. The reply wasn’t that great, and it lets us know how the govt collects data. Hope they give due importance and try to get the correct WPI values for each product at least from now on.
    — xx —
    Dear Mr. Natarajan,
    This has reference to your trailing e-mail message dated 14th October, 2013 regarding unchanged of Wholesale Price Index (WPI) of Raw Wool and prices not changing for other items for some months. We have fixed sources of data providers who supply data on a voluntary basis. We encounter problem of non-response and data providing units closing down. In such an event, we try to substitute sources of data providers. Sometimes, we succeed but we continue efforts for alternative sources when we do not succeed. There are also issues of product specifications with alternative sources apart from willingness to provide data. For some items, if we have greater number of quotations, non-response by few can be taken care of but in case of few suppliers of quotations for an item especially in Primary Articles, non-response affects the index for that item. Efforts are now being made to overcome these problems by preparing a reserve list of voluntary providers of data on a number of items in the future with the help of NSSO so that the process of substitution does not taken very long time. Also, prices sent by data providers are received under clause of confidentiality.
    Yours faithfully,
    Anupam mitra
    Deputy Economic Adviser
    Office of Economic Adviser
    Ministry of Commerce & Industry
    Tel: 011 2306 1942
    My email:
    I downloaded a Excel data file from here –
    Saw that ‘Raw Wool’ (line number 75) is unchanged at 57.4 since Nov 2009. How can a common commodity like that not have a change in price continuously for over 4 years? Likewise, lots of other prices are unchanged for months together. Would greatly appreciate if you can explain why this is so.

  • Arvind says:

    Deepak: Please feel free to use it. I’m not so active online, link to my twitter handle if you would want to. And due credits to you actually, coz it was you who found this huge discrepancy.