“The annual rate of inflation based on all India WPI is 2.37% (provisional) for December 2024, compared to December 2023,” the Ministry of Commerce and Industry stated on Tuesday.
“The positive rate of inflation in December 2024 is primarily due to price increases in food articles, manufacture of food products, other manufacturing, manufacture of textiles, and non-food articles,” the ministry added.
In November 2024, India’s wholesale prices increased by 1.89% year-on-year, easing from a 2.36% gain in October. Driven by surging food prices, particularly vegetables, October recorded a four-month high of 2.36%. Although fuel and power costs declined, food inflation soared, significantly impacting potato and onion prices.
Inflation Food Index
WPI Food Index saw a marginal decrease to 8.89% in December 2024 from 8.92% in November 2024, as per the ministry.
Comprising ‘food articles’ from primary articles group and ‘food products’ from manufactured products group, the food index decreased from 200.3 in November 2024, to 195.9 in December 2024.
A reduction was recorded in food items like cereals, pulses, wheat. However, inflation in vegetables was recorded at 28.65% against 28.57% in November. Potatoes continued to rule high at 93.20% and onions at 16.81% in December. Meat, fish and eggs also increased to 5.43% in December from 3.16% in November.
In manufactured items, inflation was 2.14%, against 2% in November.
The fuel and power category witnessed a deflation of 3.79% in December against a deflation of 5.83% in November.
Meanwhile, the recent retail inflation data showed that Consumer Price Index (CPI) eased marginally to a 4-month low of 5.22% in December from 5.48% in November.
Understanding WPI, CPI, PPI
For recording inflation, two indices —WPI and CPI — are tracked. There is another factor, Producer Price Index (PPI), which measures the average change in prices received by producers for goods and services.
WPI and CPI reflect prices at the wholesale and retail levels, respectively, and PPI at the production stage, what producers get for their output.
WPI tracks prices at the wholesale level before the goods reach consumers while CPI is about the average price at the level of consumers.
Policy makers largely rely on WPI and CPI — the long-established indices with historical data for comparison.
There is demand for comprehensive PPI data, which experts say is “more robust tracker of changes in wholesale prices”.
It is all interlinked
The fact is if producers experience higher input costs, they are bound to pass it on to wholesalers, causing WPI to rise.
If wholesale prices rise, retailers will also increase prices for consumers, leading to a higher CPI.
Most developed countries track PPI and reports quoting officials suggest that India too is getting ready to shift and that a PPI model “is ready and being evaluated by a multi-department team”.
