Wholesale inflation has increased to 1.84% in the month of September. Earlier in August, wholesale inflation had come down to 1.31%. In July it was at 2.04%. Inflation has increased due to increase in prices of vegetables and food items.
Prices of food items and primary articles increased
- Inflation rate of daily essential goods increased from 2.42% to 6.69%.
- Inflation of food items increased from 3.26% to 9.47%.
- The wholesale inflation rate of fuel and power declined from -0.67% to 4.05%.
- Wholesale inflation rate of manufacturing products decreased from 1.22% to 1%.
Impact of WPI on common man
Prolonged increase in wholesale inflation has a negative impact on most productive sectors. If wholesale prices remain high for too long, producers pass the burden on to consumers. Government can control WPI only through tax.
For example, in the situation of sharp increase in crude oil, the government had reduced the excise duty on fuel. However, the government can reduce tax cuts only within a limit. In WPI, more weightage is given to factory related goods like metal, chemical, plastic, rubber.
Wholesale inflation has three parts:
Primary article whose weightage is 22.62%. The weightage of Fuel and Power is 13.15% and the weightage of Manufactured Products is the highest at 64.23%. The primary article also has four parts:
- Food articles like grains, wheat, vegetables
- Oil seeds are included in non-food articles.
- Minerals
- crude petroleum
How is inflation measured?
There are two types of inflation in India. One is retail, i.e. retail and the other is wholesale inflation. Retail inflation rate is based on the prices paid by ordinary consumers. It is also called Consumer Price Index (CPI). At the same time, Wholesale Price Index (WPI) means the prices that one businessman charges from another businessman in the wholesale market.
Different items are included to measure inflation. For example, the share of manufactured products in wholesale inflation is 63.75%, primary articles like food 22.62% and fuel and power 13.15%. At the same time, the share of food and products in retail inflation is 45.86%, housing is 10.07% and other items including fuel also have a share.
RBI had kept the retail inflation estimate at 4.5% for this financial year.
During the recent Monetary Policy Committee meeting, RBI had kept its inflation estimate for this financial year unchanged at 4.5%. RBI Governor had said – Inflation is coming down, but the progress is slow and uneven. India's inflation and growth trajectory are moving forward in a balanced manner, but it is important to remain vigilant to ensure that inflation remains on target.
Graphics Source: VaskarAssets
