August WPI inflation up at 0.16% after being in negative zone for 4 months

Wholesale price-based inflation jumped to 0.16 per cent in August as compared to -0.58 per cent in July, 2020. The figures were released by the Department for Promotion of Industry and Internal Trade on Monday. The figures returned to positive territory after being negative for four straight months.

Meanwhile, the annual rate of inflation based on WPI Food Index decreased from 4.32 per cent in July to 4.07 per cent in August and the WPI based inflation stood at -1.81 per cent.

The Wholesale Price Index (WPI) are released on the 14th of every month with a time lag of two weeks of the reference month.

The index for primary articles with a weightage of 22.62 per cent increased by 1.81 per cent to 146.3 in August from 143.7 in July.

Prices of minerals increased by 10.21 per cent, crude petroleum and natural gas by 4.72 per cent, non-food articles by 3.06 per cent and food articles by 0.93 per cent.

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The index for fuel and power with a weightage of 13.15 per cent increased by 0.77 per cent to 91.4 in August from 90.7 in July. Prices of mineral oils increased by 1.3 per cent while prices of coal and electricity remain unchanged.

The index manufactured products with a weightage of 64.23 per cent increased by 0.59 per cent to 119.3 from 118.6. Out of the 22 NIC two-digit groups for manufactured products, 11 groups that witnessed increase in prices are manufacture of food products are beverages, leather and related products, wood and of products of wood and cork, printing and reproduction of recorded media, pharmaceuticals, medicinal chemical and botanical products, basic metals, electrical equipment, machinery and equipment, and other transport equipment.

The Wholesale Price Index remained in the deflationary territory for fourth straight month till July. Data released by the Commerce Ministry last month showed that WPI inflation came in -0.58 per cent year-on-year, compared with -1.81 per cent in June and a 4.5-year low of -3.37 per cent in May.

Wholesale inflation rises to 2.59% in December on higher food prices

Wholesaleprices based inflation surged to an eight-month high of 2.59 per cent in December, as against 0.58 per cent in November due to sharp rise in prices of food articles like onion and potato.
The annual inflation, based on monthly wholesale price index (WPI) was recorded at 3.24 per cent in April 2019.

WPI was at 3.46 per cent during December 2018.
Build up inflation rate in the financial year so far was 2.42 per cent compared to a build up rate of 2.92 per cent in the corresponding period of the previous year, as per data released by the Office of Economic Adviser, Ministry of Commerce & Industry on Tuesday.
The rate of price rise for food articles rose to 13.12 per cent during December as against 11 per cent a month earlier, while for non-food articles it rose nearly four-fold to 7.72 per cent from 1.93 per cent in November.
Among food articles, vegetable prices surged by 69.69 per cent mainly on account of onion, which witnessed 455.83 per cent jump in prices, followed by potato at 44.97 per cent.
Onion prices ruled above Rs 100 per kg in various markets till recently because of crop damage due to excessive rains. However, prices have started to move southwards with fresh crop arrival and imports.
The consumer price index (CPI) based retail inflation, as per data released on Monday, spiked to over a 5-year high of 7.35 per cent in December due to costlier food products.
The unexpected jump in inflation diminished the chances of the RBI cutting interest rate at its next monetary policy review due in early February.
Experts feel CPI is expected to further harden next month due to elevated price level of food prices mainly vegetables.
"We now expect inflation to breach 8 per cent in January and then start bottoming out. However, this jump in inflation will perforce the RBI to relook at the inflation trajectory but in our view any change to a possible change in stance could be unwarranted as we find compelling evidence of significant slowdown in discretionary consumption," SBI Economic Research Department said in a report.
It further said RBI missed the bus in cutting rates in December and if food prices remain elevated, there is a fear of economy slipping into stagflation, which indicates low growth and high inflation. This means RBI will possibly remain on hold in 2020, going by current trends. For manufactured products, the wholesale inflation cooled marginally (-) 0.25 per cent during the month under review. Fuel and power, as a category, too continued to show deflationary trend at (-) 1.46 per cent as against (-)7.32 per cent.
The rate of price rise in primary articles as a grouping rose to 11.46 per cent from 7.68 per cent a month earlier.
Primary articles, which have a weightage of 22.62 per cent in the wholesale price index, broadly comprise of food articles, non-food articles, minerals and crude petroleum and natural gas components.
Inflation for manufactured food products rose appreciably in December 2019, driven by various edible oils and fats, and dairy products, ICRA Principal Economist Aditi Nayar said.
"Although the core-WPI remained in disinflation for the fifth consecutive month, the pace of the same narrowed to 1.5 per cent in December 2019, from 1.9 per cent in November 2019. This trend is expected to continue over the next two quarters, with the core-WPI likely to emerge out of disinflation only in second half of 2020," she said.
Even if food prices record some correction, an unfavourable base effect will push up the headline WPI inflation further in January 2020, she added.

Wholesale inflation rises to 0.58% in Nov on costlier vegetables, pulses

Wholesaleprices based inflation rose to 0.58 per cent in November, as against 0.16 per cent in October due to increase in prices of food articles.
The annual inflation, based on monthly wholesale price index (WPI), was at 4.47 per cent during the same month a year ago (November 2018).

The rate of price rise for food articles rose to 11 per cent during the month as against 9.80 a month earlier, while for non-food articles it eased 1.93 per cent from 2.35 per cent in October, showed the data released by the Ministry of Commerce and Industry on Monday.
For manufactured products, the wholesale inflation remained static (-)0.84 per cent during the month under review.
The consumer price index based retail inflation, as per data released last week, spiked to over a 3-year high of 5.54 per cent in November due to costlier food products like vegetables, pulses and protein-rich items.

Govt sets up 18-member working group to revise current series of WPI

The government Thursday set up an 18-member working group for the revision of the current series of Wholesale Price Index.
The revision of the base year would help in presenting a more realistic picture of the price situation and its impact on people.

The commerce and industry ministry in a statement said the current series of Wholesale Price Index (WPI) with 2011-12 as base year was introduced in May 2017.
Since 2011-12, significant structural changes have taken place in the economy, it said.
"Therefore, it has become necessary to examine the coverage of commodities, weighting diagram and related issues pertaining to the existing series of index numbers of WPI," it said.
Accordingly, it said, the government has constituted a working group for the revision of current series of WPI(Base 2011-12) under Chairmanship of Ramesh Chand, Member, Niti Aayog.
The other members are from National Statistical Office, Ministry of Finance, Department of Agriculture, RBI and Department of Consumer Affairs.
The Department for Promotion of Industry and Internal Trade will be the nodal office for the group and will process its report/recommendation for further necessary action.
The Terms of Reference of the group include selecting the most appropriate Base Year for the preparation of a new official series of Index Numbers of (WPI and Producer Price Index (PPI) in India.
The group will also review commodity basket of the current series of WPI and suggest additions/deletions of commodities in the light of structural changes in the economy witnessed since 2011-12.
It will also review the existing system of price collection in particular for manufacturing sector and suggest changes for improvement, to decide on the computational methodology to be adopted for monthly WPI/PPI.

WPI inflation in December at 3-month low, contrary to retail trend

Contrary to hefty increase in the rate of rise in consumer prices, the Wholesale Price Index (WPI)-based inflation eased to a three-month low of 3.58 per cent in December, down from 3.93 per cent the month before.
Earlier, data from the Central Statistics Office (CSO) showed Consumer Price Index (CPI)-based inflation had risen to a 17-month high of 5.21 per cent in December, up from 4.88 per cent in November.
“The divergence in the sequential trend in CPI and WPI inflation in December was driven by food inflation and the impact of the higher housing inflation, limited to the CPI. The dip in inflation for primary food articles in the WPI for December might signal some correction in the CPI inflation for food items in the ongoing month,” says Aditi Nayar, principal economist at rating agency Icra.
The decline in WPI was driven by primary articles (those not processed), which dropped to 3.86 per cent in December from 5.28 per cent in November. The category has a weight of 22.62 per cent in the index. Within this category, food inflation eased to 4.72 per cent in December, down from 6.06 per cent in November, led by cereals, vegetables, eggs, meat, and fish.
While vegetable prices rose 56.46 per cent in December, those of pulses continued to contract. Wholesale pulse prices contracted by 34.6 per cent in December, a sixth straight month of fall.
Fuel and power inflation rose to 9.16 per cent in December, up from 8.82 per cent in November, suggesting that industry is likely to see a compression in margins.
On the other hand, wholesale inflation in manufactured products remained at the same level as before (2.6 per cent). The category has a weight of 64.23 per cent in the index. However, in this category, wholesale prices of basic metals rose by 10.03 per cent, up from 9.9 per cent in November. Those of semi-finished steel went up 6.19 per cent, from 2.89 per cent in November.
“Despite the sharp rise in crude oil prices in the current month, we expect WPI inflation in a range of 3.2 to 3.6 per cent in the March quarter, benefiting from the base effect. Therefore, the wedge between CPI and the WPI inflation is expected to remain wide in the ongoing quarter,” said Nayar
“The lower WPI reading reflects sharp seasonal correction in food prices. Further, the rupee’s appreciation may have helped cap the upside risks emanating from the rise in global commodity prices,” said Upasna Bhardwaj, senior economist at Kotak Mahindra Bank.
Adding: “We expect retail inflation to head towards 5.5-6 per cent by June 2018, before moderating towards 4.4 per cent by the end of FY19.”
The Reserve Bank of India’s Monetary Policy Committee may prefer to maintain status quo, at least through 1HCY18, as it gets more clarity on monsoons and sustainability of high crude oil prices post-the winter squeeze,” Bhardwaj said.
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