December 14, 2023
New Delhi, India
India’s Wholesale Price Index (WPI) inflation has surged to an eight-month high of 0.26% in November, marking a shift from the deflationary trend seen since March 2023. This development raises concerns about its potential impact on the country’s GDP growth.
Positive Reversal in Wholesale Inflation:
After several months in the negative territory, India’s wholesale inflation has made a noteworthy rebound, reaching 0.26% in November. This is the highest level recorded in the past eight months, indicating a positive shift in economic dynamics.
Comparison with Retail Inflation:
While wholesale inflation is on the rise, retail inflation has its own trajectory. The headline retail inflation rate rose to 5.55% in November, a three-month high. The divergence in these trends adds complexity to the economic landscape.
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Monthly Changes in Indices:
Both WPI and Consumer Price Index (CPI) experienced a 0.5% month-on-month increase in November. Notably, the surge in food prices, driven primarily by a 16.5% month-on-month increase in vegetable prices, played a significant role in this uptick.
Stability in Manufactured Products:
Contrary to the rise in food prices, manufactured products, constituting a substantial portion of the WPI basket, saw only a marginal increase of 0.1% month-on-month for three consecutive months. This stability is attributed to price weakness in key raw materials.
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Despite the positive momentum in wholesale inflation, concerns linger over nominal GDP growth. The 2023-24 Budget assumed a growth rate of 10.5%, but the actual figure for the first half of the fiscal year stands at 8.6%. This variance raises questions about achieving the targeted growth rate.
Conclusion:
As India grapples with the challenges posed by a fluctuating inflation landscape, the juxtaposition of rising wholesale prices and concerns about GDP growth underscores the need for a nuanced economic strategy. Observers will closely monitor future developments to gauge the trajectory of India’s economic recovery.
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