Inflation Worries:-
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 unfavorable 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.
1) Spotlight
Meaning: Intense scrutiny or public attention.
Example: “she was constantly in the media spotlight”
2) Concern
Meaning: Anxiety; worry.
Example: “Carole gazed at her with concern”
3) Ceded
Meaning: Give up (power or territory).
Example: “in 1874, the islands were ceded to Britain”
4) Gauge
Meaning: A means of estimating something.
Example: “emigration is perhaps the best gauge of public unease”
5) Deflator
Meaning: A figure that is used to change current prices or wages so that they can be compared to past prices or wages, by removing the effect of inflation.
Example: The price deflator measures the magnitude of price increases and detects whether higher costs drive consumers away from a product.
6) Deflate
Meaning: Bring about a general reduction of price levels in (an economy).
Example: “the budget deflated the economy”
7) Warranting
Meaning: Officially affirm or guarantee.
Example: “the vendor warrants the accuracy of the report”
8) Fanned
Meaning: Cause to become stronger or more widespread.
Example: “a fury fanned by press coverage”
9) Quickened
Meaning: Make or become faster or quicker.
Example: “she quickened her pace, desperate to escape”
10) Duo
Meaning: A pair of people or things.
Example: “the comedy duo Laurel and Hardy”
11) Cooled
Meaning: Become or make calm or less excited.
Example: “after I’d cooled off, I realized I was being irrational”
12) Reassuring
Meaning: Say or do something to remove the doubts and fears of (someone).
Example: “he understood her feelings and tried to reassure her”
13) Constituent
Meaning: Being a part of a whole.
Example: “the constituent minerals of the rock”
14) Spanning
Meaning: Extend across (a period of time or a range of subjects).
Example: “their interests span almost all the conventional disciplines”
15) Perspective
Meaning: A view or prospect.
Example: “a perspective of the whole valley”
16) Can ill afford
Meaning: If you cannot afford to do something, you must not do it because it would cause serious problems for you.
Example: We can’t afford to make any mistakes at this stage in the project.
17) Vigil
Meaning: A period of staying awake to be with someone who is ill or to call public attention to something.
Example: The boy’s parents kept a long vigil in his hospital room.
18) Spatial
Meaning: Relating to the position, area, and size of things.
Example: This task is designed to test children’s spatial awareness (= their understanding of where things are in relation to other things).
19) Undermine
Meaning: Lessen the effectiveness, power, or ability of, especially gradually or insidiously.
Example: “this could undermine years of hard work”
