WPI inflation slumps to record -4.05% in July

Extending the deflationary trend for the ninth month in a row, the Wholesale prices, as measured by wholesale price inflation (WPI) fell by 4.05 percent in July, much lower than the previous month and against the expectation of some increase, mainly due to weak food and fuel prices and lower global commodity price.

The annual rate of inflation, based on monthly WPI, stood at -4.05% (provisional) for the month of July, 2015 (over July, 2014) as compared to -2.40% (provisional) for the previous month and 5.41% during the corresponding month of the previous year. Build up inflation rate in the financial year so far was 0.80% compared to a build up rate of 2.61% in the corresponding period of the previous year.

The overall Primary Articles index, having weight of 20.12%, declined by 0.5 percent to 247.2 (provisional) from 248.4 (provisional) for the previous month. In the primary article index, the index for ‘Food Articles’ group declined by 0.6 percent to 255.7 (provisional) from 257.3 (provisional) for the previous month. The index for ‘Non-Food Articles’ group declined by 1.3 percent to 215.6 (provisional) from 218.5 (provisional) for the previous month, however the index for ‘Minerals’ group rose by 3.0 percent to 255.9 (provisional) from 248.5 (provisional) for the previous month.

Fuel & Power index having weight 14.91%, declined by 2.0 percent to 187.1 (provisional) from 191.0 (provisional) for the previous month.

Manufactured Products index, having the majority weightage of 64.97% declined by 0.3 percent to 153.7 (provisional) from 154.2 (provisional) for the previous month. Among the manufactured products, Food Products group declined by 0.6 percent, the index for ‘Beverages, Tobacco & Tobacco Products’ group declined by 0.3 percent, the index for ‘Leather & Leather Products’ group declined by 0.7 percent, Non-Metallic Mineral Products group declined by 0.9 percent and index for ‘Basic Metals, Alloys & Metal Products’ group declined by 1.0 percent.

On the other hand, the index for ‘Textiles’ group rose by 0.2 percent, Wood & Wood Products group rose by 0.8 percent, Paper & Paper Products’ group rose by 0.5 percent, Machinery & Machine Tools’ group rose by 0.1 percent and Transport, Equipment & Parts’ group rose by  0.1 percent.

For the month of May, 2015, the final Wholesale Price Index  based on final index stood at -2.20 percent as compared to -2.36 percent (provisional).

After retail inflation falling to multi-year low of 3.78 per cent in July, the shockingly low WPI inflation at -4.05 per cent has raised hopes of another rate cut by the Reserve Bank of India at the September review of the policy. Though, the RBI had hinted at a lower inflation because of the base effect and it expects the retail inflation to rise to over 5 per cent mark towards the end of the year.