New Delhi, Jun 14, 2023 (PTI) – The wholesale price-based inflation rate in India witnessed a significant decline, reaching a multi-year low of (-) 3.48% in May. This drop can be attributed to the easing prices of food, fuel, and manufactured items, according to the latest data from the wholesale price index (WPI).
May’s inflation rate marks the second consecutive month of negative territory for WPI, following April’s (-) 0.92% figure. However, the magnitude of the decline in May has hit a multi-year low, reflecting a substantial reduction in overall price levels.
In comparison to the corresponding period last year, May 2022, WPI inflation stood at a staggering 16.63%. The current year’s low inflation figure is a significant departure from the high inflationary pressures experienced in the past.
The decline in WPI inflation can be primarily attributed to several factors, including the moderation in food prices. Food inflation, a crucial component of WPI, witnessed a notable decrease, resulting from improved supply chains, favorable weather conditions, and adequate harvests. Lower food prices contribute to reduced overall inflationary pressures, benefiting both consumers and businesses.
Furthermore, fuel prices have also exhibited a downward trend, contributing to the overall decline in WPI inflation. This can be attributed to a decrease in global crude oil prices and a stable domestic fuel pricing mechanism. The reduction in fuel costs not only eases the burden on consumers but also reduces input costs for various industries, thereby promoting economic growth.
Additionally, manufactured items have experienced a decline in prices, further dampening the overall inflationary pressures. The decrease in manufacturing costs can be attributed to factors such as improved productivity, efficient supply chains, and increased competition among manufacturers. This trend provides relief to businesses and enhances their competitiveness in domestic and international markets.
The multi-year low in WPI inflation indicates favorable conditions for the Indian economy. A decrease in inflation allows the central bank to adopt accommodative monetary policies, such as lowering interest rates, to stimulate economic activity. Lower borrowing costs can incentivize investments and encourage consumer spending, thereby boosting economic growth and employment.
Moreover, subdued inflationary pressures benefit households by improving their purchasing power. When prices stabilize or decline, consumers can afford more goods and services, thereby enhancing their standard of living. This positive impact on consumers’ wallets can stimulate demand and drive economic expansion.
However, it is crucial to monitor inflation trends and their potential impact on various sectors of the economy. While low inflation can be advantageous, persistently low or negative inflation rates may raise concerns about deflationary pressures. Deflation can lead to reduced business profits, decreased investments, and a slowdown in economic activity, warranting careful attention from policymakers and industry stakeholders.
The wholesale price-based inflation rate in India has reached a multi-year low of (-) 3.48% in May. The decline can be attributed to easing prices of food, fuel, and manufactured items. This development fosters a conducive environment for economic growth, allowing for accommodative monetary policies, improved purchasing power, and enhanced consumer welfare. However, continued monitoring of inflation trends is crucial to ensure a sustainable and balanced economic recovery.
