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What is Wholesale Inflation?

Wholesale Price Index:

Wholesale inflation, based on the Wholesale Price Index, jumped to 14.23 per cent in November from 12.54 per cent in October (on a year-on-year basis), data released by the Ministry of Commerce & Industry showed.

  • It was primarily due to rise in food prices especially of vegetables, and minerals and petroleum products
  • This is the highest level of wholesale inflation in the 2011-12 series and eighth consecutive month in which it has stayed at double-digit level.
  • This comes after the retail inflation print for November, had shown a spike to a three-month high of 4.91 per cent despite a cut in excise duty on fuels.
  • The wide gap between WPI and CPI inflation reflects the price pressures on the inputs side, which are expected to pass through to the retail level in the coming months.
  • Despite not being a policy tool, the surge in the WPI is a cause of worry. While the CPI-based retail inflation — the more widely tracked policy tool — looks at the price at which the consumer buys goods, the WPI tracks prices at the wholesale, or factory gate/mandi levels.
  • Between the wholesale price and the retail price, the difference essentially is the former only tracks basic prices devoid of transportation cost, taxes and the retail margin etc.
  • And that WPI pertains to only goods, not services.
  • So, the WPI basically captures the average movement of wholesale prices of goods and is primarily used as a GDP deflator (the ratio of the value of goods an economy produces in a particular year at current prices to that of prices that prevailed during the base year).