Measures to reduce retail inflation

Measures to reduce retail inflation

Though overall wholesale price inflation measured in terms of year on year change in Wholesale Price Index (WPI) has been declining since September 2008 and has become negative in June 2009, inflation in food items continues to remain high due to lower agricultural production in some crops, increase in the minimum support prices and growth in demand. Currently the retail price inflation, measured in terms of year on year change in Consumer Price Index-Industrial Workers (CPI-IW) and Consumer Price Index – Rural Labour (CPI-RL) is higher than wholesale price inflation due to relatively higher weight of food articles and food products in CPI-IW and CPI-RL and large margins between wholesale and retail prices.

The Government monitors the price situation regularly, with price stability being high on its agenda. Measures taken to contain prices of essential commodities include selective ban on exports and futures trading in food grains, zero import duty on select food items, permitting imports of pulses and sugar by public sector undertakings, distribution of imported pulses and edible oils through the PDS and release of higher quota of non-levy sugar. In addition, State Governments are empowered to act against hoarders of food items by holding in abeyance the removal of restrictions on licensing, stock limits and movements of food articles under the Essential Commodities Act of 1955.

In general, retail price inflation would be higher than wholesale price inflation, as wholesale prices are of bulk transactions, whereas retail prices includes transportation and distribution costs, unbundling charges, shop rent, etc. However, in the case of edible oils and pulses, the Government has undertaken subsidised distribution through the PDS for the economically weaker sections. Past analysis shows that the inflation trends tracked by the WPI and CPI indices have not always been in conjunction with each other.

This information was given by Minister of State for Finance, Shri Namo Narain Meena in written reply to a question raised in Rajya Sabha today.