WPI - ECONOMY
News: February
wholesale inflation eases to 3.85%
What's in the news?
● Inflation
based on the Wholesale Price Index (WPI) moderated to a two-year low of 3.85% in February from 4.73% in
January, with manufactured product's inflation cooling from 3% in January to a
little under 2%, and primary articles, food and fuel and power recording milder
downturns in the pace of inflation from a month earlier.
● Base
effects also played a role as February 2022 had clocked a 13.43% uptick in
wholesale prices.
Key takeaways:
● Decline in the rate of
inflation in February, 2023 is primarily contributed
by fall in prices of crude petroleum & natural gas, non-food articles, food
products, minerals, computer, electronic & optical products, chemicals
& chemical products, electrical equipment and motor vehicles, trailers
& semi-trailers.
● Onion prices continued to
fall year-on-year for the 18th straight month
since September 2021, with February 2023 recording the sharpest drop of 40.14%
in wholesale prices amid this deflationary streak.
● Vegetables inflation
contracted for the fourth successive month with
prices falling 21.5% from February 2022 levels.
● Retail cereals inflation
has accelerated close to 17% in February, wholesale
inflation in the critical food item eased to a three-month low of 13.95%.
● Wholesale inflation in
fruits (7%), and milk (10.33%) also marked fresh highs
in recent times and were higher than consumer level experience of price rise in
February, indicating there may be room for more retail price hikes in coming
months.
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.