Wholesale Price Index surge is a cause of worry

Wholesale-level inflation measured by the Wholesale Price Index (WPI) shot up to 7.39 per cent in March on a year-on-year basis.

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This is the highest wholesale inflation rate since October 2012, and was driven largely by higher prices of crude oil and a surge in price levels of food items such as pulses and fruits.

The surge in March was also aided by a low base in the corresponding month of 2020.

While the Consumer Price Index-based retail inflation — the more widely tracked policy tool — looks at the price at which the consumer buys goods, the WPI tracks prices at the wholesale, or factory gate/mandi levels.

Between the wholesale price and the retail price, the difference essentially is the former only tracks basic prices devoid of transportation cost, taxes and the retail margin etc. And that WPI pertains to only goods, not services.

So, the WPI basically captures the average movement of wholesale prices of goods and is primarily used as a GDP deflator (the ratio of the value of goods an economy produces in a particular year at current prices to that of prices that prevailed during the base year).