Wednesday, 15 April 2015

WPI Inflation Remains Negative In March, Economy Surges Ahead


Wholesale Price Index (WPI) for the month of March, 2015 fell to its lowest at (-)2.33% as compared  to (-)2.06% in the previous month. It is lowest inflation level recorded in almost a decade. The food inflation came down to 6.31% as compared to 7.74% in the previous month and was the main contributor behind the fall in inflationary rates. The fuel and power segment, inflation declined to (-) 12.56% as compared to (-) 14.72% in the previous month. 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 due to lowering of Food Inflation, the Crude prices in the International Market and the Dollar/Rupee stability seen over a period of time. On month to month basis Primary articles inflation was down to 0.08% as compared to 1.43% in the previous month. Manufactured products also witnessed a decline to (-) 0.19 % compared to 0.33% in the previous month. The index provides Primary Articles with 20.11% weightage, 64.97% for manufactured products and power & fuel with 14.91%.


Consumer Price Index (CPI) also eased down to 5.17% in the month of March, 2015 as compared to 5.37% in the previous month. The easing of Retail Inflation was mainly contributed by the fact that the Food Inflation eased considerably despite fears that unseasonal rain may just scale the prices of fruits and vegetables. However, impact of damages to crop is still uncertain and may reflect in coming months.
The Crude prices in the International Market remaining at lower levels along with prices of essential food items remaining in check it seems that RBI is on course with its Short and Mid term Inflation target. The slide in CPI is contributed due to higher weightage being given to retail inflation, which is more logical in my opinion as reflects the true impact of inflation on Common People. The stability in CPI will lead to strengthening of the economy and would call for changes in the monetary policy.


Index of Industrial Production (IIP) grew at 5% in February,2015 as compared to 2.77% (revised, provisional estimate was 2.6%) in January,2015. This growth is contributed due to rise in manufacturing, mining as well as activities in Capital and Consumer Non Durables sector. It is the fastest growth rate in last nine months. The manufacturing sector grew by 5.2%, mining grew by2.5% and Electricity by 5.9%. Consumer Non Durables reflected the sharpest rise of 10.7% while Capital Goods grew at 8.8% in February. As I had mentioned previously too, growth in Manufacturing is the only way forward for the economy. Thus the rise in the core sectors along with few others will definitely help the Economy to move forward.

  • RBI has set a target of maintaining CPI below 6% till January,2016 and seems to be on course.
  • RBI wants to ease Consumer Inflation to 4% very soon.
Overall the Economy does look promising in the times to come. Moody’s raised Country’s rating from positive to stable and CRISIL has forecasted GDP to rise to 7.9% in 2015-16. RBI will be hard pressed to ease repo rates as Inflation remains under check and Industry will try and make most of the positive economic outlook. Government will also look to meet its Fiscal Deficit target while keeping an eye on the International Market Movements as Standard & Poor’s have warned of possible impact. But Morgan and Stanley also have stated that India is one of the few growth spots among emerging markets which is another positive sign going forward. The current financial year promises to be a good year for economic growth, increase in employment opportunities and overall infrastructural development. IMF has said that India will overtake China as the fastest growing economy in 2015-16 with a growth rate of 7.5% riding high on the recent policy initiatives. 

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