ICRA comments on WPI numbers


Appended is the comment by Aditi Nayar, Sr. Economist, ICRA on the WPI numbers released today.

The trend displayed by the WPI in July 2015 mirrors the fall in CPI inflation, in spite of the different composition of the two indices.

The surprising month on month decline in wholesale food prices in July 2015 is at odds with the seasonal hardening observed in the past years, and belies concerns related to the continuing deficit in monsoon rainfall.

Nevertheless, the further hardening of the y-o-y inflation related to pulses to 35.8% in July 2015 remains a cause of concern.

Despite lingering monsoon-related uncertainties, a hardening of inflationary expectations and the recent depreciation of the Rupee relative to the US dollar, risks to the inflation trajectory have diminished with the modest build-up of food prices and the recent fall in commodity prices, suggesting adequate room for further monetary easing.


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