 You're watching News Made Easy. I'm Anand Diyo Chakravarty. Wholesale prices have shot up in the last one year and that is big trouble for small businesses and small shopkeepers. Why? But let me first tell you the Wholesale Price Index. What's happened there? It's shot up by 14.5% in March compared to what it was last year. But before I tell you why it's affecting small businesses and small shopkeepers, let me explain to you what Wholesale prices are. Wholesale prices and most of you probably know are prices paid by traders and by business owners, by factories. These are input costs, right? Usually they are sold at a discount because they're bought in bulk. In fact, if you go to Sardar Bazaar, which is largely a Wholesale market, you will be able to buy things that are much cheaper than your local shop. But yes, instead of buying 1 tin of corn, maybe you'll have to buy 10 tins of corn because you have to buy in bulk to avail of that discount. And your shopkeeper gets that discount and is able to charge a slight premium to you and me, which is the maximum retail price. Of course, the maximum retail price also includes taxes and it also includes the cost of transporting from a factory or a Wholesale Mandi to the shop. Now, the final thing that I said is that the cost of transport and distribution is included in retail prices. But a largely excluded in Wholesale prices. Of course, the things like agriculture products, there is a transportation cost from the farm to the Wholesale Mandi. That would be included in the Wholesale prices and even sometimes costs of things which are minerals. There would be some amount of transportation before the Wholesale market is reached and that would be also included. But the final last mile connectivity transportation cost is not included. Now, let's see what has happened. The gap between Wholesale prices and retail prices and this is all commodities. As I told you, the WPIR Wholesale Price Index has gone up 14.5%, 14.5% in one year. But you and I are paying about 7% more or paid 7% more in March, right? Less than half. The rise is less than half. One key reason for this is that there is sometimes a gap. There is a gap between the time when Wholesale prices rise and the time it reaches us. So that gap is probably spread across a month. So if this has gone up in March, maybe the consumer price index will show up. The rise will show up in April. And also, there are different weights. So Wholesale versus rate, the weights of individual items in it are different. Let me explain what that means. Now, let's say that you are making rice, boiling rice to make rice. The price of rice in the market has gone up 30%. So the cost of boiled rice for you will also go up 30%. But let's say, when you make pakoras to make it slightly more crispy, you add 10% rice powder in the batter. So the cost of rice there is 10%. So if rice has got prices have gone up 30%, then actually the impact on pakoras is just 3%, 110%. So you can understand how the weight of individual commodities makes a difference to the rate of rise of the two things, WPI and CPI. And I'll explain what the weights are. If you look at the food group or food items, foods and beverages, then in the consumer price index or retail prices of things, it's about 46%. In rural areas, villages, it's even more than that. Whereas in the wholesale price index, because ultimately as inputs, it's only the trader who's buying food items, it's 20% and maybe food processing industry, it's just 24%. Let's look at fuel and light. For us, out of the every 100 rupees that we spent, 7% is on fuel and light. That's the weight in the consumer price index, but in the WPI because there's production involved, it is 13% and the components are different. For us, it is electricity plus a little bit of coal, but largely petrol, diesel, LPG. For companies, it is going to be a little bit of fuel and diesel, but also commercial rates of electricity and also coal and mineral oil, including crude oil. So the rates are different, the materials are different. Apparel, apparel prices, apparel for us is 6% of our cost, but if I look at the wholesale price index, it is just 1% of the wholesale price index in terms of weight. Services is 27% weight in the consumer price index basket, right? 27% of what we've spent is services, but in the wholesale price index, it does not exist because there are no wholesale services, right? Services are bought directly by, you may be certain services are bought by companies, but that's a separate issue, but you and I directly buy it in retail. So it's 27% of the consumer price index, but nothing in the wholesale price index. So that makes a difference. Now let's look at the key weights. I'll just take two things, the difference that you'll see. Wholesale versus retail prices and this is the food group. We'll see that in the WPI, the growth of food group prices is 8.7%, but in the consumer price index, it is just less than 7%. Again, there's a marginal variation which can be caused by weights of different items within that group and also which market it's being collected from, but it does show us that in general, traders or retailers are having to pay more now for what they're buying and they aren't being able to sell it to us at the same rate. Now let's take fuel and light. As I said, fuel and light and it's fuel and power and wholesale price index includes coal, it includes mineral oil and of course a part of diesel and petrol and electricity. That has gone about 34.5% because we know the price of crude oil has shot up and crude oil is an input in many industries whereas throughout most of March, thanks to the elections and even before that, fuel prices weren't raised. Most of it was raised in April, so in the consumer price index, you're not seeing that difference. So therefore, this could be one key reason why wholesale prices have gone up so sharply and consumer price index hasn't gone up and that really is just a way of accounting things and the delay in price transfer based largely on one item which is fuel and light. But let's see the difference between wholesale and retail prices for an entire from April 2021 to March 2022. The wholesale price index in this period has gone up 13% and it has consistently been above 10%. The average consumer price index has gone up just by 5.5%. So you can see that huge gap here. A big gap, the wholesale price index has gone up by more than double of what the consumer price index has gone up by, which clearly tells us that input costs have gone up and mostly it is for small businesses and also for retailers, they're not being able to pass it on to consumers because there's not enough demand. It's only big companies which have pricing power. So car makers, even though demand has gone down, they're able to increase prices. Big FMCG companies which make biscuits, shampoo, oil, toothpaste, they are able to increase prices because they're now monopolies, they're oligopolies, a few companies controlling the market. Small traders and small businesses were first wiped out by GST, COVID made it worse and now we can see prices, the price pressure on them making it much worse for them even further. And I'm going to break it up into input costs which have gone up and I'm going to compare it for March and again April to March to show you that these input costs have actually not just gone up in March. Here, fuel and power, 34.5% in just March. But if I look at the April to March period, it's gone up almost 33%. Basic metals required as inputs in making things. It's gone up by 26% in March but 25.5% between the April to March period. So the average prices have been rising for more than a year. Textiles, 12.6% in March. In fact, it was even higher in the April to March percent so it's slightly cooled right now. Rubbers and plastics similarly, 8.6% rise in March but look at the April to March rise, 12%. And finally, chemicals, 12.7% in March and 12.9% in April to March. An entire year of inputs being extremely expensive and not being fully passed on to you and me. So let's just look at why I'm seeing small businesses are in trouble because they face these input costs for nearly a year but not being able to pass it on to us because we don't have the money to buy it. If they try to pass it on to us, we won't buy it. Big companies have been able to pass it on in the last one year through their pricing power because they control the market, they're able to pass it on and that is helping them even more in killing small businesses even further. As small businesses died out in the COVID period, big companies have got even more pricing power and this inflation is allowing them to increase prices but small businesses simply cannot compete and that is something that's showing up in distress in small businesses. The fact that the loans they've taken, they're not being able to pay back. Either they've become, they're not being able to pay back certain installments or their interest or they've just defaulted and look at what has happened in September 2020 when already the situation was getting a little bad because there's been 4-5 months of lockdown, COVID. The total number of bad loans and defaults in the MSME or the small business space and these are in lakh crore, you can see rupees lakh crore was about 1.46 lakh crore. In September 2021, it has gone up to 1.66 lakh crore and that is nearly 14% up and anecdotal evidence tells us that this has become even worse between the September to April period. In the last few months, it has worsened thanks to the consistent rise in prices and what is even worse is that because prices are rising and RBI is likely to increase interest rates small businesses will find it very difficult to pay back loans and they're going to be affected by that, many of them will go bankrupt. There is a bit of information, I'll deal with that in another show in detail which shows that the number of corporates who have gone, who have died simply companies which used to regularly give their annual statements, the income statements to the Ministry of Corporate Affairs, those have dropped by 6% in 2021 in the COVID year compared to the previous year. They on an average dropped by about 2%, one year before COVID when things were slowing down it dropped by 3%, in the COVID year it dropped by 6% and we'll have to wait and see what has happened in the year after that, small businesses have probably got wiped out even more.