CPI inflation measures the retail inflation while WPI inflation measures the producer inflation. The difference arises due to the weights. For example, food basket has a weight of 45% in CPI inflation but just 15% in WPI inflation. Similarly, oil has a high importance inf CPI inflation but low weight in WPI inflation because only about 15% of the oil consumed is produced in India. WPI inflation is dominated by the manufacturing inflation while it ias a small weight in CPI inflation. That is the reason the differences arise. Let us now look at the WPI announcement for the month of December 2019.

India’s WPI inflation touched a 7-month high of 2.59% for December compared to WPI inflation at just 0.58% in November. Data released by MOSPI Tuesday showed that WPI for food accelerated to 13.24% in December from 11.08% in a month ago, largely lead by a 456% jump in onion prices. However, fuel inflation and inflation of manufactured products contracted 1.46% and 0.25% respectively. This is largely indicative of lack of pricing power among producers. It also indicates that the economy may be moving towards stagflation with output likely to be subdued and retail inflation still high.