‘Disturbing’ divergence in WPI, CPI inflation

September 08, 2009 12:02 am | Updated December 17, 2016 03:52 am IST - NEW DELHI

With food prices continuing to soar, Union Finance Minister Pranab Mukherjee on Monday admitted that the growing divergence between the rate of price rise as measured by wholesale prices and consumer (retail) prices was indeed “disturbing”.

Pointing to the wholesale price index-based negative inflation owing to last year’s high base, Mr. Mukherjee said: “Negative inflation is statistical advantage because of the year-on-year basis.

On WPI, I do feel and I agree with the Planning Commission’s assessment that positive inflation will be there by the year-end. The disturbing trend is CPI [consumer price index] is not converging with WPI for a very long period of time”.The Finance Minister was interacting with the media on the state of the economy at a function organised by the Forum of Financial Writers.

What has been confusing the common man in recent months is the fact that while WPI inflation has remained in the negative territory for the 12th week in a row despite a runaway rise in food prices, the true picture is revealed by the various consumer indices. Inflation based on retail prices of items consumed by agricultural and rural labourers stood at close to 13 per cent and that for industrial workers at near 12 per cent in July. Likewise, the CPI-based inflation for industrial workers shot up to 11.89 per cent in July from 9.29 per cent a month ago.

Evidently, the variation between WPI and CPI inflation is primarily on account of the high weightage given to food items in consumer price indices.

Mr. Mukherjee noted that while the weightage of food articles in WPI was 16 per cent, the weightage of food articles in all the three CPIs — for agriculture labourers, for rural labourers and industrial workers — was above 60 per cent.

“There is a big gap between 16 [per cent] and 60 [per cent]. Even in non-manual urban employees, another CPI index, it is nearly 40 per cent.

So, there is difference between WPI and CPI,” he said. The earlier trend was that there used to be some convergence between WPI and CPI inflations after 2-3 months. “But I am not seeing that now,” he said.

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