India’s wholesale inflation slipped below 3% during May as compared to 3.85% in April, raising hopes of a rate cut by RBI in its next Monetary Policy Review Meeting. The Wholesale Price Index (WPI) or wholesale inflation for the month of May stood at 2.17%, down 1.68% from 3.85% in April. In May, the all commodities index fell 0.4% in comparison to April.
With monsoon proceeding as forecasted, inflation is expected to come down further in the coming months, which could trigger a rate cut from RBI during its next Monetary Policy Review Meeting on 2 Aug.
“Going ahead, there could be a moderation in inflation in coming months with expectations of normal monsoons. Upside risk to inflation could emerge from movement in the global oil prices. We are expecting the WPI inflation to remain in the range of 3-4% for next couple of months,” Care Ratings said.
The wholesale inflation rate, measured by the WPI, is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices. The government has revised the base year for Index of Industrial Production (IIP) and WPI from 2004-05 to 2011-12.
“The revision in the WPI inflation rates would affect the GDP and GVA deflators and may be a precursor to a revision in growth rates for recent years, particularly for those sectors for which nominal earnings or value addition data are deflated using the WPI,” ICRA said.
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While the revised WPI series will continue to comprise of three major groups namely primary articles, fuel & power and manufactured products, as was in the previous series, the weight of each these categories has been altered in the revised series. Primary articles have been increased to 22.1%, fuel & power to 13.2% in the new base year 2011-12. However, manufactured products are reduced to 64.2% in the revision from previous base year where it stood at 65%.
The IIP numbers for April 2017, under new base rate, stood higher than market expectations at 3.1% compared to 2.7% in the month of March 2017 and against a drop of 1.2% in February 2017.