About WPI

• Wholesale Price Index measures and tracks the changes in the price of goods in the stages before the retail level. It provides estimates of inflation at the wholesale transaction level for the economy as a whole. 
• WPI basket does not cover services.
• It is released by the Office of Economic Adviser, Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry. 
• The base year is 2011-2012. 
• The index basket consists of commodities under 3 main categories in decreasing order of weightage: Manufactured products, Primary Articles and Fuel and Power. 

Why in News?

• The Wholesale Price Index stayed high in June, with provisional data pegging it at 12.07% following the record high of 12.94% in May.
• The high inflation rate is attributed to the low base effect from June 2020, which recorded -1.81% inflation, and the rise in prices of petrol, diesel, naphtha and Aviation Turbine Fuel (ATF), as well as basic metals, food products and chemicals.

What is Base effect?  

• The base effect is the distortion in a monthly inflation figure that results from abnormally high or low levels of inflation in the year-ago month. 
• For example, the base effect can lead to an apparent under- or overstatement of figures such as inflation rates or economic growth rates if the point chosen for comparison has an unusually high or low value relative to the current period or the overall data. 
• The base effect can lead to distortion in comparisons and deceptive results, or, if well understood and accounted for, can be used to improve our understanding of data and the underlying processes that generate them.

Reference:

1. https://timesofindia.indiatimes.com/business/india-business/wpi-inflation-eases-to-12-07-in-june/articleshow/84401663.cms