data | What Factors Driven Up Inflation in February 2022?

Retail inflation exceeded the RBI’s comfort level (6%) for the second straight month, while wholesale inflation remained in double digits for the 11th straight month

Retail inflation exceeded the RBI’s comfort level (6%) for the second straight month, while wholesale inflation remained in double digits for the 11th straight month

Retail inflation accelerated to 6.07% in February 2022, exceeding the RBI’s comfort level (6%) for the second straight month. Wholesale inflation remained in double digits for eleventh straight month. Data shows that wholesale inflation rose in February due to high prices for certain vegetables, diesel, gasoline, crude oil, jet fuel, chemicals (caustic soda, ammonia), raw silk, raw cotton and rose (flower). The increase in retail inflation is mainly attributed to the increased cost of certain vegetables, mustard oil, vanaspati, airline tickets, chicken, telephone charges, gasoline, kerosene and LPG.

Above the tolerance limit

The chart shows wholesale and retail inflation between January 2019 and February 2022. In February 2022, retail inflation accelerated to an eight-month high of 6.07%, driven by high food and fuel inflation. Wholesale inflation edged up to 13.11%, staying in double digits for the 11th straight month. Wholesale inflation has remained elevated mainly due to imported commodities such as crude oil.

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Wholesale Price Inflation – Item by item

The vertical axis shows wholesale price inflation (WPI) for all items in February 2022. The weight of these items in the inflation calculation is presented on the horizontal axis. For example, cabbage wholesale inflation has accelerated by 199.5% and is weighted at 0.12% in the final inflation calculation.

In February, the onion WPI slowed by 26.4%. Unlike January, however, the potato WPI accelerated in February (14.8%). The WPI of eggplant, cauliflower and tomato accelerated by over 75%, 50% and 15%, respectively. These five types of vegetables carry the greatest weight in wholesale calculations. The WPI of bitter gourd and radish accelerated by over 95% but are less significant in the calculation.

The WPI of crude oil, diesel and gasoline accelerated by at least 50%. They all carry significantly more weight in the calculation. The WPI of chemicals like liquid ammonia and caustic soda has also accelerated by over 80%. The WPI of raw cotton, raw silk and rose blossom accelerated by over 50%, 75% and 80%, respectively.

Retail price inflation by item

The retail price inflation (CPI) of all items in February 2022 is plotted on the vertical axis. The weight of these items in the inflation calculation is presented on the horizontal axis. For example, cauliflower retail inflation accelerated by 60% and carries a weight of 0.24% in the final inflation calculation.

In February, the consumer price index for onions slowed by 19.5%. Unlike January, however, the potato CPI accelerated in February (3.1%). The CPI of cabbage, eggplant, and tomato increased by over 50%, 35%, and 20%, respectively. These five vegetables carry the most weight in the retail calculation. The CPI of parwal and carrot has accelerated by over 45%, but it weighs less in the calculation.

The CPI of mustard oil, refined oil and chicken increased by 29%, 13.5% and 15% respectively and that of kerosene by over 55%. The CPI of gas and cellphone charges accelerated by about 10%.

Source: MOSPI

Also Read: Dates | Why do tomato and onion prices fluctuate?

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