CPI vs WPI vs IIP: Prices, Production, and Index Numbers

Your family’s shopping bill rises. A manufacturer receives a lower price for its goods. Factories produce more than they did last year.

Could all three happen together? Yes. They describe different parts of the economy, which is why we need different measures.

CPI measures changes in consumer prices, WPI measures changes in wholesale goods prices, and IIP measures changes in industrial production volume. The first two help us understand inflation. The third helps us understand output.

Think of three lenses looking at the same town. One focuses on household purchases, another on goods before they reach the retail shopper, and the third on how much industry produces. A clear view through one lens cannot answer every question visible through the others.

Let’s make the differences easy to recognise, then work through the calculations that often cause confusion. All the numerical examples in this lesson are invented for practice; they are not India’s reported economic data.

CPI, WPI, and IIP at a glance

Index	Full name	Main question it answers
CPI	Consumer Price Index	How have prices paid by households changed?
WPI	Wholesale Price Index	How have prices of goods at the wholesale stage changed?
IIP	Index of Industrial Production	How has the volume of industrial output changed?

If a question mentions household retail prices, start with CPI. If it mentions wholesale goods prices, think WPI. If it asks about production volume, think IIP.

The distinction between a price index and a quantity index is the foundation of NCERT’s Index Numbers chapter. Learn that distinction before memorising any basket, weight, or base year.

What does CPI measure?

The Consumer Price Index follows changes in the retail prices of a selected basket of goods and services purchased by households for consumption. Food, clothing, transport, housing, health, and education-related spending help you picture the kinds of household needs involved.

For the broad Indian series discussed here, the National Statistics Office under the Ministry of Statistics and Programme Implementation, or MoSPI, publishes rural, urban, and combined indices. MoSPI’s CPI 2024 series FAQs explain its coverage and construction.

Suppose a student used to pay Rs 60 for a particular notebook and now pays Rs 66 for the same notebook. Its retail price has increased by 10%.

That is the kind of price movement relevant to CPI. It does not establish that the entire CPI rose by 10%. The notebook is only one purchase among many, and different purchases have different importance in the basket.

Why your shopping bill may rise faster than CPI

Imagine that your family spends heavily on rent and school transport, while another spends more on food and medicines. Even when both face the same individual price changes, their overall experience can differ because their spending patterns differ.

CPI summarises a reference population’s experience. It is not a promise that every family faces exactly the published rate. The US Bureau of Labor Statistics makes this general distinction between an average consumer index and an individual’s inflation experience. The same arithmetic of different spending shares explains our two-family example; US basket rules are not being applied to India here.

Also, a bigger bill need not be caused entirely by higher prices. Buying twice as many notebooks increases your spending even if the price per notebook stays unchanged. To isolate a price change in a school numerical, compare like items and keep the stated quantities consistent.

What does WPI measure?

The Wholesale Price Index tracks changes in the prices of a representative basket of goods. It is compiled by the Office of the Economic Adviser in the Department for Promotion of Industry and Internal Trade, or DPIIT, under the Ministry of Commerce and Industry.

The three broad WPI groups are primary articles, fuel and power, and manufactured products. WPI covers goods; services have separate producer price indices and are not part of the WPI basket.

The word wholesale can mislead you into imagining only a wholesaler’s shop. Actual price collection includes ex-factory prices for manufactured goods, ex-mine prices for minerals, and mandi prices for agricultural commodities. The current series uses basic prices, excluding net product taxes and trade and transport margins. These details are set out in the Office of the Economic Adviser’s methodology note, sections 3 and 6.

Return to our notebook. Suppose its relevant wholesale-stage price moves from Rs 40 to Rs 42, while the student’s retail price moves from Rs 60 to Rs 66.

Wholesale-stage price change:
(42 - 40) / 40 x 100 = 5%

Retail price change:
(66 - 60) / 60 x 100 = 10%

These figures can coexist. The price observations are taken at different stages. Once we move to whole indices, their baskets and weights differ too.

Do not subtract WPI from CPI to calculate a retailer’s profit margin. An index point is not a rupee, and the two indices are not matched buying and selling prices for one identical basket.

What does IIP measure?

IIP measures changes in the volume of industrial production over time. MoSPI’s National Statistics Office compiles and releases it monthly.

If a factory makes more notebooks, that is an output change. If it makes the same number but sells each at a higher price, that is a price change. IIP aims to capture the former.

The current Indian series, with base 2022-23, reports four broad sectors:

• Mining and quarrying.
• Manufacturing.
• Electricity and gas supply.
• Water supply, sewerage, and waste management.

The last two lines matter when reading older notes that list only mining, manufacturing, and electricity. The expanded coverage is explained in MoSPI’s new IIP series FAQs and confirmed in its 29 June 2026 IIP release.

IIP is not a count of factories. Nor is it a measure of the whole economy’s GDP, employment, or business profit. A factory can produce more with the same workforce, and higher production need not mean higher profit.

For the distinction between output and value added, our lesson on avoiding double counting in national income is a useful next step.

Does IIP use only physical quantities?

Its purpose is to measure volume, but some output is reported in money terms where unlike products are difficult to count together. Those values need an appropriate price adjustment, called deflation, to estimate volume change.

MoSPI’s 29 June 2026 release adopted Output PPI for the relevant value-reported items and superseded the earlier WPI-deflated version of the new IIP series. So, saying that current IIP simply totals physical units, or always uses WPI for this adjustment, would be incomplete.

You do not need the full official calculation for a basic classroom problem. You do need to keep production volume separate from money value.

India’s base years: read the series label

As checked on 13 September 2026, the broad series covered in this lesson use these bases:

Series	Base used
CPI Rural, Urban, and Combined	2024 = 100
WPI	2022-23 = 100
IIP	2022-23 = 100

The CPI base is documented in MoSPI’s CPI FAQs. WPI’s revised series was released on 15 June 2026, while MoSPI confirms IIP’s revised base in its June release.

The CPI basket and weights draw on household expenditure information; the new series uses the Household Consumption Expenditure Survey 2023-24. That survey period is different from the CPI index reference year, 2024.

Base revision can update the basket, weights, and coverage as well as the reference number. You cannot safely join an old index and a new index merely because both have the same name.

An index level is not an inflation rate

An index puts a reference period at 100. A later level tells you the relative position of the measured basket against that reference.

For example, an index of 126 means the measured level is 26% above its base-period level. It does not automatically mean that prices rose by 26% in the latest year.

To find the percentage change between two comparable index values, first subtract the earlier index from the new index:

Percentage change
= Change in index / Earlier index x 100

For year-on-year inflation, compare a month with the same month of the previous year. MoSPI uses that comparison in its CPI inflation formula. For month-on-month change, compare consecutive months instead. Always name the comparison.

Solved example: 120 to 126

Suppose CPI is 120 in August of Year 1 and 126 in August of Year 2, on the same series.

Year-on-year inflation
= (126 - 120) / 120 x 100
= 6 / 120 x 100
= 5%

Three descriptions now have different meanings:

• 126 is the latest index level.
• 6 index points is the increase from 120.
• 5% is the year-on-year rate of increase.

Writing “inflation is 6%” confuses points with percentage change. Writing “inflation is 126%” confuses the index level with its rate of change.

Notice the denominator: it is 120, the earlier observation. We do not divide by 100 just because every index once had a base of 100.

How weights change the answer

A simple average treats every component equally. A weighted index gives greater influence to components with larger assigned weights.

Here is a small classroom consumer basket. Its weights and categories are invented, not official CPI weights. Each component index has the same base of 100.

Component	Weight	Price index
Food	50	110
Housing	25	108
Travel	15	120
Clothing	10	100
Total weight	100

Multiply each component index by its weight. Add those weighted values, then divide by the total weight:

Total weighted value
= 50 x 110 + 25 x 108
  + 15 x 120 + 10 x 100
= 5,500 + 2,700 + 1,800 + 1,000
= 11,000

Weighted index = 11,000 / 100 = 110

The basket’s price level is 10% above its base level. Clothing has not become more expensive in this example, but the overall index has still risen.

If we ignored the weights, the answer would be (110 + 108 + 120 + 100) / 4 = 109.5. That is not the required weighted index.

Food’s price increase is smaller than travel’s, but food has much more influence because of its larger weight. This is why the biggest individual price rise need not make the biggest contribution to the overall change.

This exercise illustrates the weighted-index principle taught in NCERT’s Index Numbers chapter. Official compilation has additional stages; the four-row basket is deliberately small enough to calculate by hand.

A production index uses output changes

Now imagine three industrial product groups. Instead of price relatives, we are given production relatives, each with base 100.

Product group	Weight	Production relative
A	60	110
B	25	96
C	15	120

Illustrative production index
= (60 x 110 + 25 x 96 + 15 x 120) / 100
= (6,600 + 2,400 + 1,800) / 100
= 108

Production for this weighted basket is 8% above the base level. Group B’s output is 4% below its own base, even though the total is higher.

This also shows why an increase in IIP does not mean every industry expanded. An aggregate can rise while one component falls.

And do not add unlike physical units directly. Ten tonnes of steel plus ten refrigerators is not twenty meaningful units of industrial output. Relatives and weights let us combine different kinds of production in a common index.

Why more sales revenue does not prove equal output growth

A factory produces and sells one standard type of desk. Assume that all desks made in each period are sold and the product’s quality is unchanged.

Measure	Earlier period	Later period
Desks produced and sold	800	1,000
Price per desk	Rs 500	Rs 600
Total sales value	Rs 4,00,000	Rs 6,00,000

Work out the three changes separately:

Output growth
= (1,000 - 800) / 800 x 100 = 25%

Price rise
= (600 - 500) / 500 x 100 = 20%

Sales value growth
= (6,00,000 - 4,00,000) / 4,00,000 x 100
= 50%

Output did not grow by 50%. Both price and quantity contributed to the sales-value increase.

To express the later output at the earlier price, remove the 20% price rise:

Later value at earlier prices
= Rs 6,00,000 / 1.20
= Rs 5,00,000

Growth at unchanged prices
= (5,00,000 - 4,00,000) / 4,00,000 x 100
= 25%

That is the intuition behind deflating a money value. In this one-product example, it recovers the directly observed volume change exactly.

One more trap: 25% + 20% = 45% does not give the sales-value growth. The changes multiply: 1.25 x 1.20 = 1.50. The extra output also sells at the higher price.

Can CPI rise while WPI falls and IIP grows?

Yes. Consider this fictional report, using comparable observations within each series and the same year-on-year comparison period:

Index	Earlier level	Later level
CPI	120	126
WPI	125	122.5
IIP	150	156

The changes are:

CPI: (126 - 120) / 120 x 100 = 5%
WPI: (122.5 - 125) / 125 x 100 = -2%
IIP: (156 - 150) / 150 x 100 = 4%

A sound interpretation is: consumer prices rose by 5%, wholesale goods prices fell by 2%, and industrial output volume grew by 4%, compared with the same period a year earlier.

Here is one possible story, not something the three numbers prove. Some industrial goods might become cheaper as supply improves. Household service costs might rise at the same time. Retail prices could also respond differently because the costs between production and final purchase have changed.

The data alone do not identify which story occurred. To explain the causes, we would need component data and further evidence.

Avoid these unsupported conclusions:

• “All household purchases became cheaper because WPI fell.”
• “Every factory grew by 4%.”
• “The economy’s GDP grew by exactly 4%.”
• “Retailers earned a 7% margin because CPI and WPI growth differ by 7 percentage points.”

Each statement asks an index to tell us something it does not measure.

Falling inflation can still mean higher prices

Suppose the price index for our small consumer basket follows this path at three annual observations:

Observation	Price index	Increase from previous year
Year 0	100	Not calculated
Year 1	110	10%
Year 2	115.5	5%

Inflation falls from 10% to 5%, but the index rises from 110 to 115.5. Prices are still increasing, at a slower annual rate. This is disinflation.

A negative inflation rate means the price index has fallen relative to the comparison period. The Office for National Statistics explains this distinction in its guide to inflation rates and price levels.

Similarly, an IIP growth rate falling from 8% to 3% can mean output is still growing. A lower positive growth rate is not the same as a fall in output.

Always read the sign and the period. Positive year-on-year inflation does not tell you, by itself, whether prices rose or fell in the latest month.

Does a base-year change make things cheaper?

No. Resetting a reference number does not change the price at a shop.

Imagine one unchanged index series shows 200 in a chosen reference period and 250 later. If we simply rescale that same series so the reference becomes 100:

Rescaled later index
= 250 / 200 x 100 = 125

Original growth
= (250 - 200) / 200 x 100 = 25%

Rescaled growth
= (125 - 100) / 100 x 100 = 25%

The index label changes; the measured increase does not.

But an actual official base revision can do more than this simple rescaling. It may introduce a different basket or different weights. Therefore, do not use a ratio between unrelated old-series and new-series observations as if it measured inflation. Use a consistent series or the relevant official linking guidance.

A short answer you can adapt in an exam

If asked to distinguish the three indices, cover the variable, coverage, and interpretation:

CPI measures changes in retail prices of goods and services purchased by households. WPI measures changes in prices of a representative basket of goods at the wholesale stage. Both are price indices, although their coverage and price observations differ. IIP measures changes in the volume of industrial production. Its growth rate describes output growth in its covered basket, rather than inflation.

If the question gives numbers, follow that explanation with the appropriate percentage-change calculation and a sentence stating the period of comparison.

Try these practice questions

1. Which index fits each observation?

Match these observations to CPI, WPI, or IIP: household bus fares rise; an ex-factory goods price falls; manufacturing output expands.

Answer: CPI, WPI, and IIP respectively. These are examples of the relevant kind of observation, not enough information to calculate an entire index.

2. A price index rises from 140 to 147. What is inflation?

Answer: (147 - 140) / 140 x 100 = 5%. Call it annual inflation only if the two observations are one year apart. The increase is 7 index points.

3. An index falls from 125 to 120. Has it fallen below its base?

Answer: No. It is still 20% above a base of 100. Its percentage change is (120 - 125) / 125 x 100 = -4%, which means a fall of 4% from the earlier observation.

4. Two price relatives are 120 and 90, with weights 70 and 30. Find the weighted index.

Answer: (70 x 120 + 30 x 90) / 100 = 111. The measured basket is 11% above its base level. The unweighted average, 105, ignores the supplied weights.

5. IIP rises from 160 to 168. Does this show 8% industrial growth?

Answer: No. Growth is (168 - 160) / 160 x 100 = 5%. Eight is the change in index points.

6. A factory’s output is unchanged, but its price rises by 12%. What happens to output volume?

Answer: It is unchanged under the stated assumption. Higher sales value from a higher price does not itself show higher volume.

7. Inflation falls from 6% to 4%. Have prices necessarily fallen?

Answer: No. Both rates are positive. At each observation, the measured price level remains above its respective comparison-period level. Check monthly index values separately to judge the latest month’s movement.

8. City A’s CPI is 130 and City B’s is 120. Is City A definitely more expensive?

Answer: No. Each index measures change relative to its reference, not an absolute rupee price level. A larger index does not establish which city has the higher cost of a comparable basket.

Sources for further reading

• NCERT, Statistics for Economics, Chapter 7: Index Numbers, reprint 2026-27. Price and quantity indices, weights, and classroom calculations. Use the newer official releases below for current series details.
• MoSPI, Frequently Asked Questions on CPI 2024 Series, February 2026. Consumer coverage, base year, expenditure survey, and inflation formula.
• Office of the Economic Adviser, Methodology Note for WPI and PPI, base 2022-23. Goods coverage and price collection, especially sections 3 and 6.
• DPIIT, New WPI and PPI Series Release, 15 June 2026. Revised WPI base and the distinction from the new producer price indices.
• MoSPI, New IIP Series FAQs, May 2026. Production volume, expanded coverage, and weighting principles.
• MoSPI, IIP Release, 29 June 2026. Confirmed sector coverage and adoption of Output PPI for relevant value-reported output.
• US Bureau of Labor Statistics, CPI FAQs. General limitations of average indices and comparisons across places.
• Chris Jenkins, Office for National Statistics, 14 December 2022. Why lower inflation does not necessarily mean lower prices.

Frequently asked questions

What is the main difference between CPI, WPI, and IIP?

CPI tracks consumer prices, WPI tracks wholesale goods prices, and IIP tracks industrial production volume. Identify whether a question is about consumer prices, wholesale prices, or output before choosing the index.

Are CPI and WPI both inflation measures?

They are price indices from which inflation rates are calculated. Their percentage changes measure price changes for different baskets and stages, so the rates need not match.

Does WPI include services?

No. WPI covers goods. India’s separately published service producer price indices should not be confused with services being added to WPI.

Is CPI only about food prices?

No. It covers a household consumption basket containing goods and services. Food is part of that basket, alongside other household needs.

Does IIP measure inflation?

No. It measures production volume. A price adjustment used to estimate volume from money-valued output does not turn IIP into a price index.

What are the current base years of CPI, WPI, and IIP?

As checked on 13 September 2026, CPI Rural, Urban, and Combined use 2024 = 100. WPI and IIP use 2022-23 = 100. Other specialised CPI series need their own labels checked.

Is an index of 150 the same as 150% inflation?

No. It means the measured level is 50% above a base of 100. Inflation over a particular period requires a comparison with the appropriate earlier index.

Why can my family’s expenses rise faster than CPI?

Your spending shares and purchases can differ from the reference basket. Your bill may also rise because you buy more, switch products, or use different services, even apart from price changes.

Can WPI inflation be negative while CPI inflation is positive?

Yes. Wholesale goods prices can fall while the consumer basket becomes more expensive. Different coverage, weights, and price stages allow the rates to move differently.

Does positive IIP growth mean every industry is growing?

No. Gains in some parts of the weighted basket can outweigh declines elsewhere. Read sector and product-group figures before making claims about a particular industry.

How do I calculate percentage change in an index?

Subtract the earlier index from the later one, divide by the earlier index, and multiply by 100. State whether the comparison is with the previous month, previous year, or another specified period.

What should I remember if I confuse these indices?

Picture a household basket, goods leaving a producer, and a factory’s output. Then write three short labels: consumer prices, wholesale goods prices, and production volume. Add the numbers only after the meaning is clear.