If CPI is rising while WPI is simultaneously declining,

Solution

CPI measures price changes at the retail/consumer level, while WPI tracks price changes at the producer/wholesale level. When CPI rises and WPI falls simultaneously, it indicates that: (1) input costs for producers are declining (hence falling WPI), but (2) these cost savings are not being passed to consumers instead being retained as higher margins by middlemen or retailers, or supply chain inefficiencies are adding costs at the final stage. This divergence is a signal for policymakers to examine distribution chain efficiency and retail price formation mechanisms.