WHOLESALE PRICE INFLATION CLIMBS TO 14.55% IN MARCH

1. Inflation: It refers to a general increase in price of goods and services in an economy.

2. WPI Inflation: It tracks increase in price of commodities at producer level. It pertains only to goods not services.

3. CPI Inflation: It tracks increase in price of commodities at retail level. It pertains to both goods and services.

4. Oligopoly Market: A market dominated by a small number of companies or suppliers, selling the homogenous or differentiated products. These sellers dominate the market and control the price of the product.

WHAT’S IN NEWS:

Wholesale inflation which has remained in double digits for a year now quickened to a four month high to 14.55% from 13.11% in February, amid a relentless rise in commodity price following the Russian invasion of Ukraine.

REASONS FOR RISE IN WPI-INFLATION:

• Rise in price of crude petroleum and natural gas, mineral oils, basic metals etc owing to disruption in global supply chain caused by Russia-Ukraine conflict.
• Rise in fuel and power inflation triggered mainly by an uptick in electricity prices.
• Sharp rise in price of manufactured foods articles inching up wholesale food price index.
• WPI is increasing due to higher price of inputs and raw materials.

POINTS OF CONCERN:

• Convergence of CPI inflation towards WPI inflation is deviating from the usual trend of WPI-inflation collapsing towards CPI-inflation.
• The decrease in number of MSMEs in COVID-19 period has given an edge to large enterprises, which is evident from increased GST collection because the component of economy we are paying GST to has grown and this will create ripe condition for oligopolistic core to start exercising purchasing power.
• WPI-inflation needs to be controlled, which can be done by following Tight Money Policy which is difficult to follow in the COVID affected economy.