Context

The annual rate of inflation based on the All India Wholesale Price Index (WPI) number is 0.53% (Provisional) for the month of March, 2024 (over March, 2023). 

Wholesale Inflation India Rises to 0.53% in March 2024

Reason for Positive rate of Inflation: Positive rate of inflation in March, 2024 is primarily due to increase in prices of food articles, electricity, crude petroleum & natural gas, machinery & equipment and other manufacturing etc.

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Wholesale Price Index (WPI)

Wholesale Price Index (WPI) represents the price of goods at a wholesale stage i.e. goods that are sold in bulk and traded between organizations instead of consumers. 

• Released by:  The Economic Advisor in the Ministry of Commerce and Industry. 
• Base year: 2011-12
  • WPI covers only goods, services are excluded. 
  • WPI is primarily used as a GDP deflator. 
  • WPI reckons only basic prices and does not include taxes, rebate/trade discounts, transport and other charges.

• Components and weightage in Wholesale Price Index basket:

• • Primary articles: 20.12 percent 
  • Manufactured products:  64.97 percent 
  • Fuel and power: 14.91 percent

Factors Responsible for Wholesale Price Index Inflation

• Imbalance in the supply and demand chain
• Changes or alterations in government policies
• Increase in the cost of production
• Currency exchange rate fluctuations
• Increase in the money supply
• Increase in government spending
• Changes in the level of economic activity
• Increase in rates of interest
• Unforeseen natural disasters or crop failures
• Increase in taxes, duty fees, and freight charges
• Higher demand for goods and services
• Unfavourable global economic conditions

How Does Wholesale Price Index Inflation Work?

• Close Monitoring: Policymakers, businesses, and investors closely monitor WPI inflation since it can have a significant impact on the country’s overall economy. 
• Impact of upsurge in the WPI inflation:
  • High inflation leads to higher rates of interest, thus, slowing down economic growth.
  • It can also lead to a decrease in purchasing power for consumers.
  • High inflation can also make exports less competitive in the global market.
  • Businesses may also experience challenges in terms of planning and budgeting.
• Impact of low WPI inflation: It may indicate a weak economy and may lead to a decrease in overall investment and consumption.

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Difference between Wholesale Price Index and Consumer Price Index Inflation