WHOLESALE INFLATION - ECONOMY
News: Wholesale
inflation eased to 4.7% in January
What's in the news?
● India’s
wholesale price inflation cooled further in January to a two-year low of 4.73%
from 4.95% in December, thanks to a slight decline in manufactured products’
price rise as well as fuel and power inflation, even as the pace of inflation
in food and primary articles hardened sequentially.
Key takeaways:
● January
marks the eighth successive month of sequential
moderation in the wholesale inflation, since it peaked at 16.63% in May
2022.
● Cereals inflation
at the wholesale level sped to the highest level in nine and a half years to
hit 15.5% in January, with paddy inflation at 7.2% and wheat price rise at
23.6% (up from 20.7% in December 2022).
● Fuel and power inflation
eased from 18.1% in December to the lowest
level in 22 months at 15.2%.
● The manufactured products
inflation eased marginally from 3.4% to 3% over the
same time frame.
WPI:
What is the Wholesale Price Index?
● The
Wholesale Price Index is an index that measures and tracks the changes in the
price of goods in the stages before the retail level.
● The
base year for the WPI will be 2011-12.
Released by:
● WPI
is Published by the Office of Economic
Adviser, Ministry of Commerce and Industry.
Components:
WPI
includes three components:
● Manufactured
products - 64.2%
● Primary
articles - 22.6%
● Fuel
and power - 13.1%
(M > P> F&P>)
● The
number of items covered in the new series of the WPI has increased from 676 to
697.
● The
WPI does not capture changes in the prices of services, which CPI does.
Go back to basics:
What is Inflation?
● Inflation
is defined as a situation where there is sustained, unchecked increase in the
general price level and a fall in the purchasing power of money.
Core Inflation:
● Core
inflation is the change in the costs of goods and services, but it does not
include those from the food and energy sectors.
● This
measure of inflation excludes these items because their prices are much more
volatile.
CPI:
● It
measures price changes from the perspective of the retail buyer.
● The
National Statistical Office
publishes it.
● The
CPI calculates the difference in the prices of commodities and services
purchased by Indian consumers for use, such as food, medical care, education,
electronics etc.
● Food
and beverages, fuel and light, bedding and footwear, housing, and clothing are
all sub-groups of the CPI.
Types:
CPIs
are classified into four types:
● CPI
Industrial Workers - Labour Bureau
● CPI
Agricultural Labourer - Labour Bureau
● CPI
Rural Labourer - Labour Bureau
● CPI
(Urban/Rural/Combined) - NSO
The first three are compiled by the Labour Bureau,
which is part of the Ministry of Labour and Employment. The NSO at the Ministry
of Statistics and Programme Implementation compiles the fourth.
Base year:
● CPI's
base year is 2012.
● The
Ministry of Labour and Employment recently released the new series of Consumer
Price Index for Industrial Workers (CPI-IW)
with 2016 as the base year.
Usage:
● CPI
data are used by the Monetary Policy
Committee (MPC) to control inflation. The Reserve Bank of India (RBI)
adopted the CPI as its key measure of inflation in April 2014.
What is the difference between WPI and CPI?
● WPI
measures inflation at the producer level, whereas CPI measures price changes at
the consumer level.
● WPI
does not account for changes in service pricing, but CPI does.
● In
the WPI, manufactured goods are given more weightage, whereas food items are
given more weightage in the CPI.