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Tuesday, 14 October 2014

Five Year Low: WPI September INFLATION shrinks to 2.38%

Wholesale Price Index (WPI) for the month of September has shrunk to 2.38% against 3.74% in August(5 year low then). 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 3.52% and 1.33% in the month of September. Wholesale Inflation takes into account the prices paid by the manufacturers on the goods imported and used as inputs. The main reason behind the WPI going down is lowering of the Crude prices in the International Market and the Dollar/Rupee stability seen over a period of time. The prices of Gold going down is another plus for the economy as it will help in bring down the Current Account Deficit (CAD).

Consumer Price Index (CPI) stood at 6.46% in the month of September. 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 October.

RBI Governor might now face the pressure to cut the repo rates in the next policy meet which has remain unchanged since January,2014 as the Industrial output remained pretty stagnant in the past few months.

RBI has a target of attaining CPI of  8% by for March,2015 and seems to be on course.

RBI wants to ease Consumer Inflation to 6% by 2016.

Retail Inflation in vegetables also eased to 8.59% in September from 15.1% in August.

This will definitely ease the pressure on the Common People and help in bringing down the fiscal deficit which is a positive sign for the economy. But on the other hand low industrial output will hurt India in the long run and it is a cause of concern which needs to be addressed.

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