Comparison of Consumer and Wholesale Prices Indices in India: An Analysis of Properties and Sources of Divergence

This paper provides a comparative assessment of CPI and WPI in terms of its key characteristics, particularly on the method of compilation, distributional properties and measures of underlying inflation. The paper further attempts a full reconciliation of inflation divergence between CPIs and WPI with particular emphasis on 2015-16. The analysis shows that differences in weight for similar items as well as differences in composition played a crucial role in determining the level and duration of observed divergence between the retail and wholesale prices inflation.