Wholesale inflation rose to 2.36% in the month of October. Earlier, wholesale inflation was 1.84% in the month of September. It fell to 1.31% in August. Inflation has increased due to increase in prices of vegetables and food items.
Prices of food and basic items have increased
- The inflation rate of daily essentials increased from 6.59% to 8.09%.
- Food inflation increased from 9.47% to 11.59%.
- The wholesale inflation rate of fuel and power declined to -5.79% from -4.05%.
- The wholesale inflation rate of manufacturing products rose to 1.50% from 1%.
Impact of WPI on Common Man
Prolonged increases in wholesale inflation have a negative impact on most productive sectors. If wholesale prices remain high for a long time, producers pass the burden on to consumers. Government can control WPI only through tax.
For example in the event of a sharp rise in crude oil, the government reduced the excise duty on fuel. However, the government can reduce taxes only within a limit. In WPI, more weightage is given to factory related goods like metal, chemical, plastic, rubber.
There are three parts to wholesale inflation
A primary article which has a weightage of 22.62%. Fuel and power has a weightage of 13.15% and manufactured products have the highest weightage of 64.23%. The primary article also has four parts:
- Food items like grains, wheat, vegetables
- Non-edibles include oil seeds.
- mineral
- 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. The rate of retail inflation 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 what one trader charges from another trader in the wholesale market.
Various items are included to measure inflation. For example, manufactured goods accounted for 63.75% of wholesale inflation, primary items such as food 22.62% and fuel and power 13.15%. At the same time, food and products accounted for 45.86% of retail inflation, housing accounted for 10.07% and other items including fuel also contributed.
The RBI had pegged retail inflation at 4.5% for this financial year
During the recently held monetary policy committee meeting, the RBI kept its inflation forecast unchanged at 4.5% for this financial year. RBI Governor said – Inflation is coming down, but progress is slow and uneven. India's inflation and growth path is moving in a balanced manner, but it is important to remain vigilant to ensure that inflation remains on target.
Image Credit: (Divya-Bhaskar): Images/graphics belong to (Divya-Bhaskar).
