Wholesale inflation tumbles even as retail inflation shoots up; here’s what upset the maths

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Updated: December 13, 2019 11:58:19 AM

As retail inflation shot up to a 16-month high in October, the low weight of food prices in the Wholesale Price Index has kept the wholesale prices benign. 

Wholesale price, wpi, WPI, wholesale market, wpi surges, CPI, consumer price index, price riseWPI is unlike the Consumer Price Index (CPI), which tracks the prices of goods and services purchased by consumers.

Wholesale prices in India dropped to a 40-month low of 0.16 per cent in October. As retail inflation shot up to a 16-month high in October, the low weight of food prices in the Wholesale Price Index has kept the wholesale prices benign. The food items have around 15 per cent weight in the WPI whereas they weigh more than 45 per cent in the CPI. In October, WPI inflation rose 3.2 per cent for food articles, while it declined 0.3 per cent for non-food articles; 3.2 per cent for minerals; and 0.7 per cent for crude petroleum and natural gas, according to the Ministry of Commerce and Industry. However, the rate of inflation based on WPI Food Index surged from 5.98 per cent in September 2019 to 7.65 per cent in October. 

WPI measures the changes in the prices of goods sold and traded in bulk by wholesale businesses to other businesses. WPI is unlike the Consumer Price Index (CPI), which tracks the prices of goods and services purchased by consumers. The WPI inflation rate in September fell to a 39-month low of 0.33 per cent from 1.08 per cent over the same period a year ago. 

Also Read: Retail inflation at 16-month high; crosses RBI’s comfort level at 4.62% in October

“The further deepening of the disinflation of core-WPI items is along expected lines, underscoring the subdued demand conditions in the economy, and supporting the case for further monetary easing in December 2019,” said Aditi Nayar, Principal Economist, ICRA.

Watch: What is Inflation, Types and Causes?

Meanwhile, retail prices in India surged to a 16-month high in October 2019. The consumer price index (CPI) grew at 4.62 per cent, exceeding RBI’s benchmark of 4 per cent. The major reason behind the spike in retail inflation was food inflation,which skyrocketed 7.89 per cent in October. The prices of vegetables and pulses rose dramatically by 26 per cent and 12 per cent on-year respectively. The prices of meat and fish also rose nearly 10 per cent. RBI has significantly revised down median forecasts of inflation for 2019-20 since the November 2018 round of the RBI survey.

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