WPI inflation ebbs to all time low of -2.06% in February

Contrary to the trend witnessed in retail inflation numbers, the annual rate of inflation, based on monthly wholesale price index (WPI) continued to show disinflationary trend by ebbing to -all time low level of 2.06% in February as compared to -0.39% witnessed in January and 5.03% during the corresponding month of the previous year. The figure was way lower than street expected figure of around -0.80%. If that’s not enough, December WPI too was revised down to -0.50% from 0.11% earlier. Meanwhile, build up inflation rate in the financial year so far was -2.50% compared to a build up rate of 5.53% in the corresponding period of the previous year.

The major contraction in number came on account of sharp dip in the prices of fuel and vegetables. The index for Primary Articles, which occupies 20.12% in the overall inflation, declined by 1.9% to 241.9 (provisional) from 246.6 (provisional) for the previous month. This dip in primary article index came mainly on account of for `Food Articles` group which declined by 0.8% to 250.5 (provisional) from 252.4 (provisional) for the previous month due to lower price of egg (8%), fruits & vegetables and tea (5% each), moong (3%), ragi (2%) and coffee, pork, beef & buffalo meat and barley (1% each). The index for ‘Non-Food Articles’ group declined by 0.8 percent to 206.0 (provisional) from 207.6 (provisional) for the previous month.

Meanwhile, the index of Fuel & Power, which weighs 14.91% in the overall index, declined by 4.4% to 181.3 (provisional) from 189.7 (provisional) for the previous month due to lower price of furnace oil (14%), aviation turbine fuel and bitumen (13% each), high speed diesel (6%), petrol (5%), kerosene (4%) and LPG (3%). Additionally, the index of Manufactured Products group, which occupies the maximum 64.97% weight in the overall index, declined by 0.3% to 154.1 (provisional) from 154.5 (provisional) for the previous month.

Notably, while Inflation, as measured by the wholesale price index (WPI), marked the fourth straight month of deflation in price, this is completely contrary to the trend witnessed in Consumer price inflation (CPI) which rose for third successive month to 5.1% in February. However, CPI data despite rising remains to be well within RBI’s comfort zone, bolstering cases for further rate cut by India’s central bank.