Trends In WPI Inflation

Context:

• India’s wholesale prices remained in deflationary state for the third successive month in June, with the rate of price contraction increasing to -4.12% from -3.48% in May.
• This represents the sharpest contraction in wholesale prices in approximately eight years.

Reasons for Deflationary Trends:

• Base Effect: The trend is mainly driven by the base effects from the previous year and the decline in commodity prices.
• Decline in Commodity Prices: The decline in the inflation rate is attributed to decreases in prices of mineral oils, food products, basic metals, crude petroleum and natural gas, and textiles. 
• Global Uncertainties: A surge in vegetable prices, along with disruptions in the supply of cereals and pulses due to excessive rainfall, delayed sowing of major crops, and the onset of El Nino conditions, adds uncertainty to the outlook for food inflation.

Wholesale Price Index:

• Definition: It is an indicator that determines the average changes in the price of goods that are sold in bulk in a wholesale market. This index is useful in calculating the change in commodity prices at different stages before it reaches the retailer. The WPI is calculated only for goods.
•  WPI Data: The WPI is published by the Office of Economic Adviser, Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry.
• Base Year: 2011-12

Items Included in Wholesale Price Index:

• There are 697 items included in the index. These items are further divided into three categories and shown with their relative weights in calculation of WPi:
  • Primary articles: 22.62%
  • Fuel and Power: 13.15%
  • Manufactured Goods: 64.23%

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