WPI Inflation stood at 5.7% in March; Jan WPI revised

India's Whole sale Price Index (WPI) inflation for the month of March stood at 5.7%. The Ministry has revised its January WPI inflation to 5.53% from 5.25%. The country's WPI in the month of February 2017 stood at 6.6% as compared to 5.25% of January 2017 and negative 0.85% during the same month of previous year. 

The primary articles inflation for March was at 4.63% as against 5% in February. 

"The annual rate of inflation, based on monthly WPI, stood at 5.70% (provisional) for the month of March, 2017 (over March, 2016) as compared to 6.55% (provisional) for the previous month and -0.45% during the corresponding month of the previous year," said Ministry of Commerce and Industry. 

The index of fuel & power declined by 0.1 percent to 203.7 (provisional) from 203.8 (provisional) for the previous month due to lower price of bitumen (2%) and furnace oil (1%).  However, the price of LPG (2%) and aviation turbine fuel (1%) moved up.

The index of manufactured products declined by 0.1 percent to 158.7 (provisional) from 158.8 (provisional) for the previous month.

For the month of  January, 2017, the final Wholesale Price Index for ‘All Commodities’ stood at 185.1 as compared to 184.6 (provisional) and annual rate of inflation based on final index stood at 5.53 percent as compared to 5.25 percent (provisional) respectively as reported on February 14, 2017. 

Since the start of financial year 2016-17, WPI has been rising consistently, so much so that in February it reached to a 4-year high due to rise in fuel inflation (21.0%) and lower base in the previous year’s index. 

source: tradingeconomics.com

Interestingly, core WPI, which has been increasing since July 2016, declined marginally to 2.42% in February 2017 - it was at 28-month high of 2.67% in previous month.   

Normura, in one of its report before the numbers, said, “WPI inflation will rise in the next three months before the inflation rate tapers off." The report further said, "We expect WPI inflation to average a much higher 4.4% y-o-y in 2017 versus the 2% average in 2016". 

ICRA expected, "Average food prices have displayed a mixed trend in early-March 2017, with a decline in prices of pulses, potatoes and cereals, and a rise in prices of sugar, onions and tomatoes. The expected seasonal uptrend in prices of perishables over the course of the month is likely to outweigh the persisting fall in prices of pulses, contributing to a further hardening of food inflation in March 2017."

"However, the sharp correction in crude oil prices witnessed over the last week would aid in dousing minerals inflation in March 2017. Moreover, the continued appreciation of the INR relative to the US$ would dampen the landed cost of imports. Such trends are likely to restrain headline WPI inflation at around 6.0% in the ongoing month," said ICRA. 

Accordingly, ICRA expected average WPI inflation to rise to 4.0% in FY2018 from 3.7% in FY2017, led by minerals and non food manufactured products 

While analysts at Kotak Mahindra Banki said, “While global reflation trends continue to point towards an upside risk to the WPI trajectory, recent stability in commodity prices may curb further sharp upside. For FY2018, we expect WPI inflation to average 4.8% as against 3.7% in FY2017."

Motilal Oswal said, "Helped by a favorable base and on account of stable international commodities and INR, WPI inflation is likely to fall sharply in March near 6.3% level. This is well below the Mar-13 estimate of 6.8% stated by RBI in its Jan-13 policy."

Recently, a Crisil analysis has blamed the variance to the steeply falling WPI and the more-or-less stable CPI for rising gap between GVA and GDP numbers. 

The difference between CPI and WPI, which was merely 25 basis points  in November 2016 (before demonetisation) increased to 290 basis points in February 2017. Since December 2016, WPI inflation is more than CPI inflation.

Upasna Bhardwaj, Senior Economist, Kotak Mahindra Bank said, "Going forward, the surge in WPI inflation on the back of high food prices and pickup in commodity prices continues to provide a floor to future retail inflation trajectory even as positive base effect may keep the headline inflation benign." 

Lastly, Philip Capital said, "WPI inflation is expected to remain elevated in March month as well and decline thereafter (similar to CPI). "