Difference between retail, wholesale inflation narrows to 16-month low

The difference between the two has come down to 2.14 percentage points. Retail inflation in May was 4.75%.
Image used for representational purposes only.
Image used for representational purposes only.

NEW DELHI: The gap between retail inflation and wholesale inflation has narrowed to 16-month low as the latter rose to a 15-month high in May to 2.6%.

The difference between the two has come down to 2.14 percentage points. Retail inflation in May was 4.75%. The difference was narrower than this only in January 2023, when the retail inflation logged 1.12 percentage points higher than the wholesale inflation.

The wholesale price index (WPI) in May doubled that of 1.3% recorded in the previous month. WPI had contracted by 3.61% in May 2023. The rise in May WPI was due to month-on-month rise across all major categories barring fuel and power, which showed a rise of 1.35% in May as against 1.38% in April. Wholesale prices of primary articles, which comprise of food articles, oil seeds, minerals and crude petroleum showed a jump of 7.2% in May as against 5.01% in April.

The large divergence between retail and WPI inflation has been an enigma of the Indian economy. The divergence was much higher last year, when in June 2023 retail inflation was 9 percentage points higher than the WPI. In June 2023, retail inflation clocked 4.87% rise, wholesale inflation fell 4.18%. Exactly a year ago in June 2022, a reverse trend was seen with WPI inflation exceeding retail inflation by 9.22 percentage points.

Experts cite the composition of the two indices for the sharp divergence. Wholesale price index, tracks prices in wholesale market, doesn’t cover prices of services, making it much more volatile than the retail inflation index.

“Outlook for food inflation has brightened due to anticipations of a normal monsoon, which is expected to bolster agricultural production. We expect WPI to average around 3% in FY25,” said Rajani Sinha, Chief Economist, CareEdge Ratings.

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