Perspective on Wholesale Price Index numbers by Prof. Krupesh Thakkar, ITM B-School
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Below are Perspective On Wholesale Price Index numbers By Prof. Krupesh Thakkar, CFA, HoD, Financial Markets, ITM B-School
The Wholesale Price Index – WPI for June-21 fell to 12.07% from 12.94% in May-21. Though the WPI rose by 0.75% on a month-to-month (m-o-m) basis, the annual index fell owing to the lower base of last year.
The rise in WPI is again broad based with the primary article group price index going up by 0.86% (m-o-m) with that of the manufacturing products group going up by 0.38% (m-o-m. The continuous rise in fuel prices resulted in one more month of stiff sequential rise in the price index of fuel and power group, this time by 2.9%. The only silver line has come from the price index of food articles which remains unchanged.
The spillover impact of WPI to Retail Inflation, as known, depends on the statistical impact, i.e., products and weights represented by these two indices. However, it also depends on the extent of transfer of higher input cost to consumers. According to the latest IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) release, though the input costs increased further in June-21 for chemicals, electronic components, energy, metals and plastics, the rate of price rise was the joint-lowest in five months. Similarly, although the additional cost burdens were again transferred on to clients, for the tenth successive month, the rate of charge inflation was at a three-month low..
So, whether the inflationary pressures reduce or not will further depend on the monsoon and the ease in supply side pressures once the restrictions due to Covid are lifted.
Above views are of the author and not of the website kindly read disclaimer
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