Reference Text
Time Left10:00
The
Wholesale
Price
Index
as
a
measure
of
price
gains
is
back
in
the
national
spotlight.
The
latest
data,
which
show
a
sharp
surge
in
wholesale
inflation
in
June,
to
a
54-month
high
of
5.77%,
are
a
cause
for
concern.
While
the
WPI
is
no
longer
the
primary
focus
in
the
Reserve
Bank
of
India's
inflation-targeting
approach
to
monetary
policy
formulation
having
ceded
that
role
to
the
Consumer
Price
Index
the
gauge
remains
economically
significant
nevertheless.
The
measure
of
wholesale
price
gains
is
the
key
deflator
in
computing
the
Index
of
Industrial
Production
and
is
also
used
to
deflate
Gross
Domestic
Product
at
current
prices.
A
detailed
look
at
WPI
data
for
June
reveals
several
pressure
points
warranting
closer
macro-economic
scrutiny.
Not
only
have
rising
crude
oil
prices
persistently
fanned
inflation
by
contributing
significantly
to
a
214
basis-points
month-on-month
jump
in
June
for
the
primary
articles
group
they
have
also
led
to
rapidly
accelerating
double-digit
price
gains
in
the
fuel
and
power
group.
Inflation
in
the
fuel
and
power
group
has
quickened
every
month
since
February's
4.55%
print,
to
16.18%
in
June.
Food
articles
are
another
source
of
worry,
especially
the
prices
of
vegetables
and
the
politically
sensitive
duo
of
potatoes
and
onions.
While
inflation
in
vegetable
prices
more
than
tripled
in
pace
from
May's
2.51%
to
8.12%
in
June,
the
annual
gains
in
potato
prices
have
been
in
a
steep
upward
spiral
for
five
straight
months
and
exceeded
99%
in
June.
And
while
inflation
in
onion
prices
at
the
wholesale
level
has
cooled
appreciably
from
January's
194%
level,
at
18.25%
the
rate
is
still
far
from
reassuring.
Manufactured
products
the
third
key
group-level
constituent
of
the
WPI
with
the
largest
weight
of
64.2%
are
also
signalling
a
worrying
wider
inflationary
trend.
This
could
feed
through
to
consumer
price
gains,
which
touched
a
five-month
high
of
5%
in
June.
The
headline
inflation
in
this
group,
spanning
564
items,
ticked
up
for
a
third
consecutive
month
in
June
to
4.17%.
Manufacture
of
basic
metals
that
includes
a
range
of
goods
from
alloy
steel
castings,
stainless
steel
tubes
to
copper
plates
and
aluminium
sheets
products
that
find
diverse
applications
across
multiple
end-use
industries
posted
headline
inflation
of
17.34%,
an
increase
from
the
15.79%
reading
in
May.
To
be
sure,
the
price
gains
have
to
be
seen
from
the
perspective
of
an
unfavourable
base
effect
WPI
inflation
in
June
2017
was
just
0.9%.
But
policymakers
can
ill
afford
to
ease
their
vigil,
especially
given
the
government's
decision
to
increase
the
minimum
support
price
for
kharif
crops
and
uncertainty
about
the
spatial
impact
of
this
year's
monsoon
rains
on
overall
agricultural
output.
After
all,
a
sustained
trend
of
high
WPI
inflation
will
not
only