Winning Bizness Desk

Mumbai. In the month of August, there has been a decline in Wholesale Price Index based (WPI) inflation and it came down to 12.41%. Earlier it was at 13.93% in July and 15.18% in June. However, wholesale inflation has remained in double digits for the 16th consecutive month. Wholesale inflation has come down to a 10-month low in July. Earlier in September 2021, the WPI was down from 13% to 10.66%. The fuel and power index, which includes items such as LPG, petroleum and diesel, declined to 33.67% from 43.75%.

Govt can control WPI only through taxes

Prolonged rise in wholesale inflation is a matter of concern. It mostly affects the productive sector. If the wholesale price remains high for too long, the producers pass it on to the consumers. The government can control WPI only through taxes. For example, in the event of a sharp rise in crude oil, the government had cut excise duty on the fuel. However, the government can deduct tax only within a limit, as it also has to pay salary. In WPI, more weightage is given to factory related goods like metals, chemicals, plastics, rubber.

Prices of food items keep rising

Retail inflation has increased due to rising prices of food items, especially edible oil and vegetables. According to government data released on Monday, the Consumer Price Index (CPI) based retail inflation has risen to 7% in August. It was 6.7% in July. This is the fifth consecutive month that the inflation rate has crossed the RBI's upper limit of 6%.

How is inflation measured?

There are two types of inflation in India. One is retail, that is, retail and the other is wholesale inflation. Retail inflation rate is based on the prices offered by ordinary customers. It is also called Consumer Price Index (CPI). Whereas, Wholesale Price Index (WPI) refers to the prices that one trader in the wholesale market charges another trader. These prices are linked to deals done in bulk. Different items are included to measure both types of inflation. For example, the share of manufactured products in wholesale inflation is 63.75%, primary articles like food 20.02% and fuel and power 14.23%. At the same time, the share of food and products in retail inflation is 45.86%, housing 10.07%, clothing 6.53% and other items including fuel also contribute.