Wholesale inflation eased to 1.31% in August due to cheaper daily essentials. This is its lowest level in 4 months. It was 1.26% in April. While a month ago in July, wholesale inflation dropped to 2.04%.
Earlier on September 12, the government had released the retail inflation figures. Retail inflation rose to 3.65% in August. It was 3.54% in the month of July. Retail inflation has increased in the month of August due to increase in prices of vegetables.
Prices of food and basic commodities fell
- Inflation rate of daily essentials decreased from 3.08% to 2.42%.
- Food inflation declined to 3.26% from 3.55%.
- The wholesale inflation rate of fuel and power rose to -0.67% from 1.72%.
- Wholesale inflation rate of manufacturing products declined to 1.22% from 1.58%.
There are three parts of 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
- Oilseeds are non-food items
- mineral
- Crude petroleum
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 face of sharp rise in crude oil, the government reduced the excise duty on fuel. However, the government can reduce the tax cut only within a limit. In WPI, more weightage is given to factory related goods like metal, chemical, plastic, rubber.
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 the prices charged by one trader to another trader in the wholesale market.
Various items are included to measure inflation. For example, manufactured goods accounted for 63.75% of gross 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 recent Monetary Policy Committee meeting, the RBI kept its inflation forecast unchanged at 4.5% for this fiscal 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).
