Why India’s Wholesale Price Inflation Rises in January, 2017?

During January 2017 the yearly rate of inflation of India, based on wholesale prices, increased to 5.25 per cent. In December 2016 this rate had been estimated at 3.39 per cent. As per the data on Wholesale Price Index (WPI) brought out by the Commerce and Industry Ministry of India, in January 2016 the yearly inflation rate was -1.07 per cent during January 2016. There has however been a drop in the wholesale inflation rate as far as food articles are concerned. In January 2017 it came down to -0.56 per cent from -0.70 per cent during December 2016. In January 2016 this particular rate had been pegged at 6.46 per cent.

Increase in some areas

Primary articles however have become costlier in January 2017. These goods make up 20.12 per cent of the total weight of Wholesale Price Index. The increase was by 1.27 per cent. When compared to January 2016, the annual wholesale inflation rate for onions came down by 28.86 per cent. In the same period, potatoes saw a decrease by 0.20 per cent. In all, vegetable prices had come down by 32.32 per cent. In the same period, pulses’ wholesale prices increased by 6.21 per cent. Prices of wheat also increased by 9.49 per cent. The same could also be said of food items based on protein such as eggs, fish, and meat that became costlier by 3.59 per cent on the whole.

The case of manufactured goods

The costs of manufactured goods make up almost sixty five per cent of the said index. In January 2017 these prices increased by 3.99 per cent. It was the 10th straight month that the prices recorded a rise. In December 2016, these prices had increased by 3.67 per cent. Goods such as edible oils and sugar, which are part of this particular category, saw an increase of 10.07 per cent.

Wholesale Price Inflation Rises
Wholesale Price Inflation Rises

Increase in sugar prices

This has happened because of the increase in sugar prices, which has happened because of reduction in sugar production. Sugar has recorded an increase of 22.83 per cent. In the same period prices of edible oils have increased by 6.25 per cent. Prices of power and fuel products have also increased in January 2017. It increased by 18.14 per cent in January 2017 as opposed to 8.65 per cent in December 2016. In January 2016 these prices had increased by 9.89 per cent. In December 2016 the prices of high-speed diesel had gone up by 31.10 per cent.

Increase in fuel prices

In the same period prices of petrol, also referred to as gasoline, had increased by 15.66 per cent. The prices of liquefied petroleum gas or LPG had gone up by 1.52 per cent in the period under consideration. The Central Statistics Office (CSO) had also said that the yearly retail inflation rate of India had come down to 3.17 per cent during January 2017. In December 2016 this rate had been at 3.41 per cent and in January this rate was pegged at 5.69 per cent.

Manufacturing goods

In the same period, there was an increase in the inflation rate in manufacturing items. In December 2016 these prices had increased by 3.67 per cent and that rate went up to 3.99 per cent in January 2017. Much of this could be attributed to increase in the prices of products such as metal products, and iron and steel to name a few. All this has caused the Department of Industrial Policy and Promotion (DIPP) to increase its estimates for inflation in November 2017. Previously the rate was estimated at 3.15 per cent but now it has been revised to 3.38 per cent.

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