Monday, 15 September 2014

Five Year Low: WPI Inflation shrinks to 3.74%

Wholesale Price Index (WPI) for the month of August shrunk to 3.74% against 5.19% in July. It is the lowest since October,2009 when WPI stood at 1.8%. Stable rupee and lower commodity price in the global market has led to the decline as per the Economist. The food price index, fuel and power price index contracted to 5.15% and 4.54% in the month of August. Wholesale Inflation takes into account the prices paid by the manufacturers on the goods imported and used as inputs.

Consumer Price Index (CPI) stood at 7.8% in the month of August. With the expected Crude prices going down and prices of essential food prices remaining in check it can be expected that CPI will go down further for the month of September.

However the chances of interest being lowered by the RBI Governor still look bleak as CPI is still close to the RBI target of 8% set for March,2015.

Notable Points relating to Inflation:
  • RBI wants to ease Consumer Inflation to 6% by 2016.
  • Vegetable prices contracted 4.88%.
  • Potato price rose by 15.2% during the same period.
  • Prices of Protein rich items contracted during the period while the prices of Pulses and Milk rose.

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