Data Talk India: The Ministry of Commerce and Industry has recently made a decision to discontinue the weekly Wholesale Price Index (WPI) of primary articles and fuel and power components. The primary articles and fuel and power components are traditionally some of the most volatile components of price index components. The Cabinet Committee on Economic Affair believes that these data add little analytical value to the existing monthly WPI data but possibly misrepresent changes in India’s inflation scenario. For example, in 2011, implied primary articles weekly inflation ranges from as low as 0.1% to 19.8%, whereas the range of monthly primary articles inflation figures were substantially more subdued at 3.1% to 18.4%.
Wholesale Price Index: Weekly and Monthly Implied Inflation
Chart provided by: CEIC
In India, the WPI inflation has declined substantially from its recent high of 10% in September 2011 to 6.6% in January 2012. This was largely attributed to reduced food price inflation, which dropped from 8.3% in November 2011 to -0.5% in January 2012, and to the Reserve Bank of India (RBI)’s continual effort in combating inflation. In 2011, the RBI has raised the repo rates, India’s benchmark interest rates, seven times from 6.25% to 8.5%. Despite the decline in the overall price growth, fuel and power prices have climbed more than 10% since February 2010. Such persistent rises in fuel and power prices continue to raise concerns. With the possible economic downturn ahead, higher fuel and power prices are likely to add extra burdens to India’s industries and households, particularly those who fall in the lower income strata.
Currently, India’s interest rates are creating pressure from market participants for monetary easing. Given the unfavorable impacts from Europe’s financial turmoil and the slowed overall price growth, the RBI has already signaled its readiness on rate cuts as inflation continues to ease.
By Chan Yee Lui – CEIC Analyst