Food prices rose 1.14% over April levels. Image used for representative purpose only. 
| Photo Credit: K. Murali Kumar

Inflation in India’s wholesale prices accelerated to a 15-month high of 2.61% in May, more than double April’s pace, with food inflation surging to a 10-month peak of 7.4% driven by steeper prices for vegetables, fruits, pulses and cereals, and a resurgence of price rise in manufactured products after 14 months of decline.

Economists said the rise in wholesale inflation in May signals there is room for a further surge in consumer prices despite retail inflation easing to a 12-month low of 4.75% last month, especially as food and industrial input prices are spiking globally. May was the seventh month in a row that the WPI rose on a year-on-year basis after seven consecutive months of decline, and it is expected to rise over 3% this month.

On a month-on-month basis, the Wholesale Price Index (WPI) was up 0.2% in May, easing from a ten-month high of 0.8% a month earlier, with food prices rising 1.14% over April levels and manufactured products’ prices up 0.64%.

The heatwaves in May helped fire up the inflation rate for vegetables to the highest level in nine months at 32.4%, and a six-month high of 5.8% for fruits. Price rise in cereals sped to 9%, while that for pulses reversed direction to hit a six-month high of 22%.

Within vegetables, tomato prices were up 64.5% in May from 40.6% in April, while inflation in onion and potato dropped slightly to a tad over 58% and 64%, respectively. Bank of Baroda chief economist Madan Sabnavis said these spikes in vegetable prices were partly due to supply shortfalls and the heat wave aggravated the challenge. “This is a major concern as it will keep up the pressure on the inflation till the next crop comes,” he told The Hindu.

India Ratings flagged similar concerns about pulses prices remaining elevated in double-digits as the new crop would be harvested only in October-November. “Elevated food inflation at the wholesale level is worrisome as this would keep retail food prices firm even going forward. Retail food inflation has been above 8% for the past seven months,” said the firm’s senior director and principal economist Sunil Kumar and senior analyst Paras Jasrai in a note.

India Ratings expects retail food inflation to remain over 8%, with wholesale prices expect to rise further to 3.5%, in June. CareEdge Ratings’ chief economist Rajani Sinha also pointed out that industrial metal prices have risen 9.3% since March-end and food prices are increasing globally.

“Positive rate of inflation in May is primarily due to increase in prices of food articles, manufacture of food products, crude petroleum & natural gas, mineral oils, other manufacturing, etc,” the Commerce and Industry Ministry said.

“Indian GDP data are not seasonally adjusted, and they are also revised multiple times before they are finalised three years after the close of the relevant financial year,” the Finance Ministry said. File
| Photo Credit: PTI

The Finance Ministry on September 15 scotched aspersions cast by “certain sections” on the credibility of Indian GDP data, which showed a 7.8% uptick in the first quarter of this year, stressing that Indian GDP data is not seasonally adjusted and is finalised three years later so “it is wrong to look at the underlying economic activity based on GDP indicators alone”.

“Ideally, critics would have done well to look at several other growth indicators to see if other data match their conclusions. Purchasing Managers’ Indices indicate that the manufacturing and services sectors are growing. Bank credit growth is in double digits. Consumption is improving, and the government has vigorously ramped up capital expenditure,” the Ministry said in a long post on social media platform X, formerly known as Twitter.

“Higher frequency data must be relied upon to form a view of the strength of the economic activity,” the Ministry said, adding that “if anything, India’s growth numbers might understate the reality because manufacturing growth indicated by the Index of Industrial Production (IIP) is far lower than what manufacturing companies are reporting”.

“Indian GDP data are not seasonally adjusted, and they are also revised multiple times before they are finalised three years after the close of the relevant financial year… Many international agencies have revised up their growth forecast for FY24 (financial year 2023-24) after the first quarter data for FY24 was released. They would not have done so if the underlying economic activity was weak,” the Ministry asserted.

The Ministry also called out references to nominal GDP growth being lower than real GDP growth as “a new bogey being spread to discredit the GDP numbers and indicate that underlying economic activity is quite weak” and said both do not stand up to scrutiny.

“India’s GDP deflator is dominated by the Wholesale Price Index (WPI) [which] peaked in the first quarter of 2022-23 due to the oil and food price increases in the wake of the war in Ukraine and supply-side disruptions. Prices began to come down from August 2022 onwards. Hence, WPI is now contracting year on year. It will soon pass once the statistical base effect disappears,” the Ministry statement noted.

“If inflation were higher, critics would argue that nominal GDP growth is much higher because of inflation and that there was little underlying activity. MoSPI calculates quarterly GVA in real terms first, and then, using the deflator, nominal values are obtained. No wonder nominal growth rates have slowed, with WPI contracting in recent months. This will normalise in the coming months,” the statement pointed out.

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“India’s real GDP growth was 7.8% year on year in the first quarter of 2023-24. This is as per the Income or Production Approach. As per the expenditure approach, it would have been lower. So, a balancing figure – statistical discrepancy – is added to the expenditure approach estimate. These discrepancies are both positive and negative. Over time, they wash out,” the Ministry pointed out.

“In fact, in FY23 and FY22, the ‘statistical discrepancy’ was negative. In other words, growth as per the Income Approach was lower. Using the expenditure approach, it would have been higher than the 7.2% reported for FY23 and higher than the 9.1% reported for FY22,” it emphasised.

“India consistently uses the Income Side approach for calculating GDP growth for various reasons. It does not switch between the two approaches depending on which one is favourable,” the Ministry underlined.

“So, arguing that nominal GDP growth is more reliable because India has issues with its calculation of GDP deflator is to invent an argument where none exists. This is just to justify the liking for nominal GDP growth because it has been moderating in recent quarters after the high growth in the first fiscal quarter of FY23. In other words, critics want to latch on to anything that does not paint the Indian economy in a good light,” the Ministry concluded.

Prime Minister Narendra Modi digitally addresses an event in New Delhi on August 19, 2023.
| Photo Credit: PTI

Prime Minister Narendra Modi asserted on August 19 that India’s economy is shining as a beacon of hope in these challenging times.

“With robust growth and resilient spirit, the future looks promising. Let us keep this momentum and ensure prosperity for 140 crore Indians,” he said on X, reacting to news portal Moneycontrol’s ‘Bullish on India’ campaign.

The portal, which specialises in reporting on markets and financial sector, had posted on X that the country’s economy has not just withstood challenges, but thrived setting the stage for optimism.

The ‘Bullish on India’ campaign showcases India’s economic resilience and growth potential in various critical sectors, it said.

It aims to analyse the key drivers of India’s economic growth while fostering awareness about the unparalleled potential the nation offers at a time of a global economic slowdown, the portal said in a separate statement.

“With detailed analysis of macroeconomic factors such as manufacturing, demography, economy, markets and India’s rising stand in the global leadership, ‘Bullish on India’ has been presented as a data backed campaign that underlines India’s resilient economic growth,” it said.

The campaign seeks to analyse key drivers of India’s economic growth while fostering awareness about the “unparalleled potential” the nation offers at a time of a global economic slowdown, it added.

“There are various adversities that have shaken economies worldwide in the past few years. However, India is standing tall, retaining its stature as the ‘world’s fastest-growing major economy’,” it said, noting that the country is set to become the third largest economy in the coming years.

India observed its 77th Independence Day this year. This analysis measures India’s relative performance in the past 76 years compared to other countries across four parameters — GDP per capita, Human Development Index (HDI), Infant Mortality Rate (IMR) and women’s participation in Parliament. Owing to technological advancement and infrastructural development, India and other countries have made remarkable progress in the past seven and half decades. So it becomes imperative to look at where India stood compared to other nations around the time of independence and where it stands now among them.

India is compared with these countries: BRICS (Brazil, Russia, China, South Africa), G-7 countries (Canada, France, Germany, Italy, the United Kingdom, and the United States), emerging economies (Argentina, Chile, Colombia, Egypt, Hungary, Indonesia, Iran, Malaysia, Mexico, the Philippines, Poland, Saudi Arabia, Thailand, Turkey, and the United Arab Emirates) and the Indian subcontinent (Bangladesh, Bhutan, Nepal, Pakistan and Sri Lanka).

Chart 1 | The chart compares GDP per capita (in $) of 26 countries between the 1960s and 2022.

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India’s GDP per capita ranking of 24 out of 26 nations analysed remained unchanged between the 1960s and 2022. While Indonesia and Nepal were lagging behind India in the 1960s, Pakistan and Nepal were lagging behind in 2022.

Chart 2 | The chart compares the Human Development Index of 31 countries between 1950 and 2021.

India’s HDI increased by 0.11 points in 1950 to 0.633 in 2021. However, India’s ranking slipped from 26 in 1950 to 29 by 2021. Of the five countries which lagged behind India in 1950, Saudi Arabia, Indonesia and Bangladesh—moved ahead by 2021, with scores of 0.87, 0.7 and 0.66 respectively.

Chart 3 | The chart compares infant mortality rates in 32 countries between 1960-1975 and 2021. 

Between 1960 and 1975, India had the seventh-worst IMR among these 32 nations. In 2021, India regressed four spots and became the third-worst. Of the six countries which were behind India in 1960-75, five (Turkey, Bangladesh, Bhutan, Egypt and Nepal) surpassed India by 2021. However, South Africa regressed.

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Chart 4 | The chart compares the share of women in Parliament in 31 countries between 1997 and 2022. 

Women’s participation in India increased from 7% in 1997-98 to 14.9% in 2022. Over 10 countries were behind India in this indicator in 1997-98. In 2022, only five remain below India.

In case of other indicators like access to electricity and usage of the internet, India has had significant progress. Between 1993 and 2000, only 50% of India’s population had access to electricity. By 2020, this increased to 99% of its population. A majority of the 32 countries considered provided electricity to over 99% of their population by 2020, except for Pakistan, South Africa and Nepal where the share remains below 90%. In 1990, almost no country considered, except for the U.S., had any access to the Internet. But by 2020, India has managed to provide internet access to 43% of its population. While India lags behind 27 countries in this indicator, Bhutan (53.5%) is the only country in the subcontinent that is ranked above India.

In 1960, with a population of 45.05 crore people, India had the second-highest population behind China (66.7 crore). By the end of 2022, India’s population stood at 1.417 billion, surpassing China’s 1.412 billion, making India the most populous country in the world, according to the World Population Review.

Source: World Bank and Our World in Data

vignesh.r@thehindu.co.in and rebecca.varghese@thehindu.co.in

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