Inflation worries

Inflation worries

Wholesale Price Index data for June warrant a closer macro-economic scrutiny

The Wholesale Price Index as a measure of price gains is back in the national spotlight(सुर्खियों). The latest data, which show a sharp(तीव्र) surge(वृद्धि/लहर) in wholesale(थोक) inflation(मुद्रा-विस्तार) in June, to a 54-month high of 5.77%, are a cause (कारण/वजह) for concern(चिंता/मतलब) . While the WPI is no longer the primary focus in the Reserve Bank of India’s inflation-targeting(लक्षित) approach(प्रवेश/दृष्टिकोण) to monetary policy(मौद्रिक नीति) formulation(सूत्रीकरण) — having ceded that role to the Consumer Price Index — the gauge(अनुमान/विस्तार) remains(बाकी है) economically significant(महत्वपूर्ण/सार्थक) nevertheless. The measure(मात्रा/माप) of wholesale price gains is the key deflator in computing the Index of Industrial Production and is also used to deflate(भाव गिराना/कम करना) Gross(कुल/सकल) Domestic Product at current prices. A detailed look at WPI data for June reveals(पता चलता है) several pressure points warranting(ज़मानत देना) closer macro-economic scrutiny(समीक्षा/छानबीन). Not only have rising crude oil prices persistently(लगातार /जुटा हुआ) fanned inflation — by contributing(योगदान) significantly to a 214 basis-points month-on-month jump in June for the primary articles group — they have also led to rapidly(शीघ्रता से) accelerating(गतिवर्धक) double-digit price gains(लाभ ) in the fuel and power group. Inflation in the fuel and power group has quickened(तीव्र करना/सचेत करना) 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(जोड़ी) of potatoes and onions. While inflation in vegetable prices more than tripled(तीन गुना) 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(घुमावदार/पेंचदार) for five straight months and exceeded 99% in June. And while inflation in onion prices at the wholesale level has cooled appreciably(पर्याप्त रूप) from January’s 194% level, at 18.25% the rate is still far from reassuring(आश्वस्त) .

Manufactured products — the third key group-level constituent(घटक/मतदाता) of the WPI with the largest weight of 64.2% — are also signalling a worrying(चिंताजनक) wider(व्यापक) inflationary(मुद्राप्रसार) trend(प्रवृत्ति/झुकाव) . 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(बित्ते से नापना/फैलाना) 564 items, ticked up(चुरा लिया) for a third consecutive(लगातार) month in June to 4.17%. Manufacture of basic metals(मूल धातुओं) that includes a range of goods from alloy steel castings, stainless(निर्मल/बेदाग़) steel tubes to copper plates and aluminium sheets — products that find diverse(अनेक/मुक़्तलिफ़) applications across multiple end-use industries — posted headline inflation of 17.34%, an increase(वृद्धि) from the 15.79% reading in May. To be sure, the price gains have to be seen from the perspective(स्वरूप/संभावना )of an unfavourable base effect — WPI inflation in June 2017 was just 0.9%. But policymakers can ill afford(जुटाना/समर्थ होना) to ease their vigil, especially given the government’s decision to increase the minimum support price for kharif crops and uncertainty(अनिश्चितता/संदेह) about the spatial(स्थानिक) impact(प्रभाव) of this year’s monsoon rains on overall agricultural(कृषि संबंधी) output. After all, a sustained(निरंतर) trend of high WPI inflation will not only add pressure on the RBI to raise(बढ़ाना/उठाना) interest rates, but could also potentially(संभावित) undermine(कमजोर/क्षीण करना) the pace(गति) of GDP growth.

Important Vocabulary

1.Surge(वृद्धि/लहर)
Synonyms: deluge, flood, flow, growth, outpouring
Antonyms: decline, decrease

2.Spotlight(सुर्खियों).
Synonyms: fame, light, limelight, notoriety, public eye
Antonyms: obscurity

3.Reveals(पता चलता है)
Synonyms: acknowledge, admit, affirm, announce, concede
Antonyms: conceal, contradict, deny, disavow, dispute

4.Persistently(लगातार /जुटा हुआ)
Synonyms: endlessly, continually, forever, frequently, persistently

5.Spiral(घुमावदार/पेंचदार)
Synonyms: circling, coiled, circular, circumvoluted, corkscrew
Antonyms: straight, uncurling, unwinding

6.Constituent(घटक/मतदाता)
Synonyms: basic, combining, composing, division, essential
Antonyms: accessory, additional, auxiliary, extra, inessential

7.Diverse(अनेक/मुक़्तलिफ़)
Synonyms: differing, disparate, distinct, divergent, diversified
Antonyms: like, same, similar, alike, conforming

8.Perspective(स्वरूप/संभावना )
Synonyms: angle, aspect, attitude, context, mindset

9.Raise(बढ़ाना/उठाना)
Synonyms: boost, hike, increment, accession, accretion
Antonyms: decrease, decline, deduction, fall, shrinkage

10.Undermine(कमजोर/क्षीण करना)
Synonyms: blunt, cripple, erode, frustrate, hurt
Antonyms: aid, assist, build, construct, create

 

 

 

Credit To the Hindu News Paper

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 add pressure on the RBI to raise interest rates, but could also potentially undermine the pace of GDP growth.

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