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India's WPI data suggests deflation
Feb 16, 2015

The wholesale price inflation data is here and suggests a deflation in the month of January 2015. With oil prices on decline, India has witnessed much sought relief in the overall inflation levels in the economy. The WPI inflation has come down to a five year and half low of negative 0.39 %. However, as an article in Economic Times highlights, a negative inflation data has given fresh reasons for economists to worry. This is because this could suggest an overcapacity and weakness in the pricing of manufactured products. One must note here that the manufacturing inflation has now come down to 1% and could drag retail inflation below the levels desired by RBI. Does this make a valid reason for further rate cuts by RBI? Before rushing to conclusions, one must note that food inflation still remains at 6 months high. And much of the downtrend in WPI is due to lower crude prices, which is quite volatile and could play spoilsport on the feel good factor about falling inflation.

Data Source:

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