Wholesale inflation hits 44-month high as essentials get costlier
Wholesale inflation rose to 9.87% in June from 9.68% in May, marking the highest level in 44 months.
In June, wholesale inflation (WPI) rose to 9.87%, up from 9.68% in May. This is the highest level in the past 44 months. Previously, in September 2022, wholesale inflation was recorded at 10.70%. The Ministry of Commerce released these figures on 14th July.
The main reason for the rise in wholesale inflation is the increase in prices of essential goods and food items. If the ongoing tension between the United States and Iran continues, prices may rise further. Moreover, data released a day earlier showed that retail inflation (CPI) also increased for the sixth consecutive month, reaching 4.38%.
- Inflation in essential goods rose from 4.99% to 7.00%.
- Food index inflation increased from 4.49% to 6.14%.
- Wholesale inflation for fuel and power decreased from 30.33% to 27.41%.
- Inflation for manufacturing products remained stable at 7.48%.
The weightage of essential goods in wholesale inflation is 22.62%, fuel and power is 13.15%, and manufactured products have the highest weightage of 64.23%. Wholesale inflation also affects the common people. When it remains high for a long time, companies pass on the increased cost burden to customers, leading to a rise in retail prices.
The government can mitigate its impact to some extent through measures like tax adjustments. For instance, during a sharp rise in crude oil prices, the government reduced excise duty on fuel. However, there is a limit to tax cuts. The highest weightage in wholesale inflation is for metals, chemicals, plastics, rubber, and other industrial products.
Meanwhile, retail inflation has been rising for six consecutive months. Due to the increased prices of several food items, including potatoes and ginger, retail inflation reached 4.38% in June. It was 2.74% in January and 3.93% in May. In India, inflation is measured on two scales. Retail inflation (CPI) is based on the prices paid by consumers in the market, while wholesale inflation (WPI) reflects the prices at which goods are sold by one trader to another in the wholesale market.