Wholesale price-based inflation eases to 8.39%, lowest since March 2021
Wholesale price index (WPI), which determines the price of products at the wholesale stage, eased in October, as per the government data shared on Monday. The data showed that, in October, the wholesale price-based inflation dropped to 8.39% year-on-year, compared to 10.7% recorded in September. Notably, since March 2021, this is the first time that the WPI reading has slipped to a single-digit number.
Why does this story matter?
Inflation has remained a major issue for India even as many countries are witnessing an economic crisis due to various factors. Moreover, the purchasing capacity of people has declined since the COVID-19 pandemic hit, as at least 10 million people lost their jobs in India. As per the Centre for Monitoring Indian Economy, 97% of households' income declined since the pandemic as of June 2021.
What caused the fall in WPI
The Ministry of Commerce and Industry has attributed the WPI fall in October to the decline in prices of "mineral oils, basic metals, fabricated metal products, except machinery and equipment, textiles, other non-metallic mineral products, minerals, etc.," in a press release. This decline is expected to reflect in India's retail inflation which stood at 7.41% in September.
Highest WPI was recorded at 15.88% in May
Since March last year, the highest WPI was recorded in May this year at 15.88%.It is followed by the WPI reading in October 2021, when the WPI inflation was recorded at 13.83%.Before declining to 8.39% in October 2022, it was 10.79% in September.
Food inflation also saw a decline in October
Meanwhile, the food inflation in the country also witnessed a decrease as it eased from 11.03% in September to 8.33% in October.Similarly, vegetable inflation saw a major decline in October as it dropped from 39.66% in September to 17.61% in October.
Impact on India's monetary policy
To frame monetary policy in the country, the Reserve Bank of India (RBI), which controls India's monetary and other banking policies, mainly considers retail inflation besides other factors. For the last nine months, retail inflation has consecutively breached the RBI's upper tolerance threshold of 6%, as per a report by NDTV. Notably, September 2022 recorded five-month high retail inflation at 7.41%.
Government working to bring inflation down
As the inflation rate has been above 7% of late, Finance Minister Nirmala Sitharaman last month said the government was working to bring it down. Inflation at around 7%, she said, "is at a manageable level," adding they were working to decrease it to under 6% and ideally to 4%. However, Sitharaman had noted, "Fundamentals of the Indian economy were in a good position."