The annual rate of inflation is 14.55% (Provisional) for the month of March, 2022 (over March, 2021) as compared to 7.89% in March, 2021.
What is Inflation?
- Inflation refers to the rise in the prices of most goods and services of daily or common use, such as food, clothing, housing, recreation, transport, consumer staples, etc.
- Inflation measures the average price change in a basket of commodities and services over time.
- Inflation is indicative of the decrease in the purchasing power of a unit of a country’s currency. This could ultimately lead to a deceleration in economic growth.
- However, a moderate level of inflation is required in the economy to ensure that production is promoted.
- In India, inflation is primarily measured by two main indices — WPI & CPI which measure wholesale and retail-level price changes, respectively.
Why there is spike in inflation?
The high rate of inflation in March, 2022 is primarily due to rise in prices of crude petroleum and natural gas, mineral oils, basic metals, etc owing to disruption in global supply chain caused by Russia-Ukraine conflict.
Basic facts –
- The Office of the Economic Adviser, Department for Promotion of Industry and Internal Trade (DPIIT) has released index numbers of wholesale price in India.
- Provisional figures of Wholesale Price Index (WPI) are released on 14th of every month (or next working day) with a time lag of two weeks of the reference month and compiled with data received from institutional sources and selected manufacturing units across the country.
- After 10 weeks, the index is finalised and final figures are released and then frozen thereafter.
About the Wholesale Price Index (WPI) –
- It is published by the Office of the Economic Advisor to the Government of India (Ministry of Finance).
- WPI continues to constitute three major groups—Primary Articles, Fuel and Power, and Manufactured Products.
- The new series of the WPI was released by the Government with the revised base year as 2011-12. The prices used for compilation do not include indirect taxes in order to remove impact of fiscal policy.
- A new Wholesale Food Price Index (WPFI) has been introduced—combining the Food Articles (belonging to the group Primary Articles) and Food Products (belonging to the group Manufactured Products). Together with the Consumer Food Price Index (CPFI) released by Central Statistics Office.
- Difference between WPI and Retail Inflation (CPI) – While the CPI-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.