Retail prices rising 10-times faster than wholesale

In the midst of an ongoing debate among policy makers over price rise, the Economic Survey today said the retail prices in the country are rising at a rate ten times faster than that for the wholesale prices.

The survey put at 1.6 per cent the rate of price rise in wholesale market, as measured by wholesale price index (WPI), for the current fiscal 2009-10, against an inflation of 11.4 per cent based on consumer price index (CPI).

The CPI-based inflation has been higher than that based on WPI for four consecutive years now, but the gap has been widening every passing year. In 2004-05, the CPI-based inflation was, in fact, lower than the WPI one and the two were equal in 2005-06, the Survey said.

"The recent period has witnessed significant divergence in WPI and CPI inflation rates, principally on account of the larger weights assigned to the food basket in the CPI and due to the fact that retail prices are sticky downwards," the Survey said.

The divergence between wholesale price inflation and retail inflation is due to higher weightage of food prices in consumer price indices.

It reflects faster rise in the prices of food items. Food inflation stood at 17.58 per cent for the week ended February 13.

The food group, which had lower inflation, has higher weights of 57 per cent in the CPI-IW (Industrial Worker) basket compared to only 27 per cent in the WPI basket.