Wholesale inflation gave a shock, but good news came on the GDP front

WPI i.e. Wholesale Price Index increased for the third consecutive month. WPI stood at 2.61 percent in May, which was 1.26 percent in April. This is the highest level of wholesale inflation seen in India since February 2023. However, in the meantime, good news has come on the GDP front. CII says that India's GDP growth may be 8 percent this financial year.

Jun 15, 2024 - 22:30
Wholesale inflation gave a shock, but good news came on the GDP front

Wholesale price inflation (WPI) has increased for the third consecutive month. According to the data released on Friday, WPI stood at 2.61 percent in May, which was 1.26 percent in April. This is the highest level of wholesale inflation seen in India since February 2023.

The rise in wholesale price inflation in May was mostly caused by increases in the prices of crude oil, natural gas, mineral oil, food goods, and so on. Food prices grew by 9.8 percent in May, compared to 7.74 percent in April. The most significant increase was in vegetable prices. Prices for vegetables rose by 23.60 percent in April. In May, it jumped by 32.42 percent.

WPI has been growing for three months in a row. Meanwhile, retail inflation has reached a 12-month low of 4.75 percent. Retail inflation is often more important because the RBI considers it when determining monetary policy.

Amidst the rise in wholesale inflation, there is also good news from the economic front. Industry body CII says that India's GDP growth may be 8 percent this financial year. According to CII, India's economy is mainly dependent on agriculture, manufacturing, and services sectors. These sectors will benefit from continuously increasing government expenditure and good monsoon.

CII's estimate is more optimistic than that of the World Bank. The World Bank estimates that India's GDP will grow at a rate of 6.6 percent this year. At the same time, the International Monetary Fund (IMF) has projected growth at 6.8 percent and the Asian Development Bank (ADB) has projected growth at 7 percent.

The special thing about CII's estimate is that it has expected 3.7 percent growth in agriculture, which was 1.4 percent last year. However, it said that due to the base effect, the growth of the manufacturing sector may decline from 9.3 percent to 8.4 percent. Rating agency Moody's has also reiterated that India will remain the fastest-growing economy in the Asia-Pacific region this year.

Moody's said in a report released on Thursday, "We hope that the new government will continue its old policies after the general elections. Its focus will remain on developing infrastructure and encouraging private sector investment." Last month, Moody's had projected 6.6 percent GDP growth for India in the current financial year.

Muskan Kumawat Journalist & Content Writer