Wholesale price inflation stayed in the negative zone for a third straight month through June, even as retail inflation remained above 6%, keeping the wedge between the two price gauges at elevated levels during the pandemic. The gap was to the tune of 4.07 percentage points (ppts) in January, which steadily shot up to 9.51 ppts in May before easing to 7.9 ppts in June.
The huge gap reflects decent margins cornered by retailers, especially in essentials like food items, during the pandemic, while a pan-India lockdown kept a lid on WPI in manufactured products.
The gap also mirrors different compositions of the two gauges — food articles make up for about a half of the CPI, while manufacturing products dominate the WPI with a 65% weight.
Importantly, while a double-digit deflation in fuel, in sync with subdued global crude oil prices, weighed on the headline WPI, the transport and communication services, captured by the CPI, sharply rose in recent months (it was 7.14% in June) following duty hikes in fuel.