India's WPI Entered Negative Territory in April

By IndraStra Global News Team

Cover Image Attribute: Image by Thomas G. from Pixabay

Due to the combination of a high base effect and a decline in global commodity prices, the Wholesale Price Index (WPI) experienced a significant drop, reaching a nearly three-year low of (-) 0.92 percent in April. This marks the first occurrence in almost three years, specifically since July 2020, that the inflation rate based on WPI has entered negative territory. The Ministry of Commerce and Industry released this data on Monday.

Decline in the rate of inflation in April 2023 is primarily contributed by fall in prices of basic metals, food products, mineral oils, textiles, non-food articles, chemical & chemical products, rubber & plastic products, and paper & paper products.

 - the government noted. 
According to analysts, this trend is anticipated to persist throughout the year, with the full-year WPI inflation projected to range between one to two percent. The lower WPI inflation rate is expected to have a subsequent impact on reducing retail inflation, as its effects are seen with a time lag, thereby exerting a notable influence on core Consumer Price Index (CPI) inflation. In April, the country witnessed a decline in retail inflation, reaching a low of 4.7 percent, the lowest in 18 months, compared to the recorded 5.7 percent in March. The last instance of WPI deflation was observed in July 2020 at (-) 0.25 percent, while the preceding lowest point occurred in June 2020 at (-) 1.81 percent.
During its first monetary policy review meeting of the fiscal year in April, the Reserve Bank of India (RBI) opted to maintain the repo rate, which is the key benchmark interest rate at which the RBI lends to other banks, at 6.5 percent. This decision assessed the impacts of previous policy rate tightening measures.
India has experienced retail inflation levels that surpassed the RBI's target of 6 percent for three consecutive quarters, only returning to the RBI's desired range in November 2022. According to the flexible inflation targeting framework, if the Consumer Price Index (CPI)-based inflation remains outside the range of 2-6 percent for three consecutive quarters, it is considered a failure by the RBI to effectively manage price increases. The CPI experienced a significant surge in 2022, reaching a peak of 7.79 percent in April of that year.

About the Wholesale Price Index (WPI)

The Wholesale Price Index (WPI) is an economic indicator that measures the average change in the prices of goods at the wholesale or producer level within a specified period. It tracks inflationary trends and price movements in the wholesale market. The WPI covers many commodities, including primary articles, fuel and power, and manufactured products. A decreased WPI reading could contribute to the reduction of retail inflation. 
The Ministry of Commerce and Industry of the Government of India, as well as other national statistical agencies, compile and publish the index. It provides valuable insights into the overall price movements and inflationary pressures experienced by producers and wholesalers, serving as a key tool for policymakers, economists, and market participants to analyze and assess the state of the economy.

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