Winning Bizness Desk
Mumbai.India's wholesale inflation rose to a 44-month high of 9.87% in June as higher prices of food items and daily essentials continued to fuel inflationary pressures, according to Commerce Ministry data released on Tuesday. The latest figures came a day after retail inflation also rose for the sixth consecutive month, signalling persistent price pressures across the economy.
The Wholesale Price Index (WPI)-based inflation stood at 9.68% in May and was last higher at 10.70% in September 2022. Rising prices of primary articles and food products remained the biggest contributors, while economists cautioned that prolonged geopolitical tensions between the United States and Iran could further push up commodity prices if crude oil becomes costlier.
Key drivers behind the inflation surge
The June data showed food inflation strengthened significantly even as inflation in fuel and power moderated slightly. Manufacturing inflation, however, remained unchanged during the month.
Key takeaways from the latest data:
- Primary articles inflation rose from 4.99% in May to 7.00%.
- Food index inflation increased from 4.49% to 6.14%.
- Fuel and power inflation eased from 30.33% to 27.41%.
- Manufacturing products inflation remained unchanged at 7.48%.
Primary articles include cereals, vegetables, oilseeds, minerals and crude petroleum. Higher prices in these categories generally raise production costs across industries before gradually reaching consumers.
How wholesale inflation affects consumers
A sustained rise in wholesale inflation eventually pushes up retail prices as manufacturers pass on higher input costs. The government has limited tools to contain WPI inflation and generally relies on tax measures to soften the impact of rising commodity prices.
The WPI basket is dominated by manufactured products, which account for 64.23% of the index, followed by primary articles at 22.62% and fuel and power at 13.15%. This makes factory input costs a crucial factor in determining overall wholesale inflation.
Retail inflation continues upward march
Retail inflation, measured through the Consumer Price Index (CPI), also continued its upward trend in June, rising to 4.38% from 3.93% in May. It has now increased for six consecutive months after touching 2.74% in January. The rise was mainly driven by higher prices of vegetables and kitchen staples, including potatoes and ginger.
Retail inflation trend:
- January: 2.74%
- May: 3.93%
- June: 4.38%
The steady rise in consumer inflation suggests households are increasingly feeling the impact of higher food prices despite retail inflation remaining well below wholesale inflation.
What the inflation numbers indicate
India tracks inflation through two indicators—Wholesale Price Index and Consumer Price Index. While WPI reflects prices in the wholesale market, CPI measures the prices paid by consumers and serves as the Reserve Bank of India's primary inflation gauge.
With both wholesale and retail inflation moving higher, policymakers are expected to keep a close watch on food prices, global crude oil trends and supply-side disruptions, as these factors will determine the inflation outlook in the coming months.
