Limitations of WPI

♤ It doesn’t include services such as health, education, transport, finances etc.

♤ Doesn’t account for the products of the unorganized sector in India, which account for

more than 30 percent of the manufactured output of the Indian economy.

♤ Since the collection of prices is on voluntary basis, the flow of price data, especially from manufacturing units, becomes irregular leading to problems in compilation of Wholesale price index. While in case of CPI data collection is done by NSSO official surveys.

♤ It reflects the price movement at wholesale level, thereby not reflecting the retail prices at which price goods are bought by the final consumer.

It was for this reason, the RBI has started using CPI for “inflation targeting” as recommended

by Urjit Patel Committee.