Wholesale inflation has been in double digits for a year. It rose to 14.55 per cent in March this year, its highest level in four months. While retail inflation reached 6.95 per cent in March, which is well above the Reserve Bank of India’s (RBI) target. Wholesale inflation measures the increase in prices at the wholesaler’s point and takes into account only the increase in the prices of goods, whereas the Consumer Price Index (CPI) measures the price increase at the retailer’s point and It involves changes in the prices of goods and services.
More use of mobile will give a big blow to the customers
The maximum weighting of WPI for manufactured goods is 64.23 per cent, while the maximum weighting of CPI is 45.86 per cent for food and beverages. Because of this, it becomes difficult to estimate retail inflation from wholesale inflation as the scale of the two figures is different. Many changes are being made in this regard, which can make it easier to estimate retail inflation on the basis of wholesale inflation data.
Due to which wholesale inflation flared up
Primary articles, fuel and electricity, and manufactured goods have weights of 22.62 per cent, 13.15 per cent, and 64.23 per cent, respectively, in the estimate of wholesale inflation. The rise in inflation is due to disruption in global supply chains, resulting in increased prices of crude oil, natural gas, mineral oil and base metals. Fuel and electricity prices increased by 34.52 per cent. Prices of both primary and manufactured food products increased by 8.71 per cent in March, while the food articles segment in primary articles grew by 8.06 per cent in March.
The way we collect data will change
The purpose of the Wholesale Inflation Index is to measure the dynamic price rise in bulk purchases by traders. It is proposed to change the base year from 2011-12 to 2017-18 to accommodate structural changes in the economy and revise the number of items from 697 to 1,176 to include products like medicinal plants, pen drives, gym equipment He is going.
Why change is needed
The representation of commodities will now be more reliable and relevant to current production trends. The WPI will better reflect the trend in price changes of most intermediate goods or raw materials and its impact on the cost of production, reflecting a potential change in cost-based inflation. Thus, inflationary pressures in the context of wholesale inflation can be better addressed through appropriate fiscal policies, which are primarily managed through the government’s supply management.
Why both the inflation figures do not match
The trend of wholesale inflation should ideally be reflected in retail inflation as well. But recently, wholesale inflation has been found to be rising at more than twice the rate of retail inflation. Does this mean that retailers are not passing on the burden of rising prices of products to consumers? It may also mean that the prices of some products are not reflecting in the Retail Inflation Index.