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Macroscope – WPI Inflation (February 2021)

Written by - Tejesh Kumar

March 15, 2021 2 minutes

What Is The Latest Reading?

India’s wholesale inflation more than doubled from previous month figures to hit a 27-month high, since November 2018. February 2021 inflation stood at 4.17% vs. 2.03% in January 2021, increasing for second consecutive month.

Macroscope 5

WPI maintained its record of positive figures, signaling producers regaining pricing powers. The rise in WPI is mainly due to price increases of commodities in Primary Articles and Fuel & Power.

Wholesale food index jumped from -0.26% in January to 3.31% in February.

Element Inflations

Macroscope 6

Analyst Commentary

Low base effect and expected pick-up in food prices (after remaining soft for months) will be key sub-elements to observe in future readings for the wholesale price index. Pick-up in demand, and rising commodity prices can further influence the metric on the upside.

In the manufacturing vertical (index weight = 64.23%), 17/22 elements witnessed price rises due to higher input costs. Key input material in oil saw price surge due to hopes demand improvement on the back of COVID-19 vaccinations. Declining crude oil inventories in U.S., tighter supplies from OPEC, and rising govt. taxes, further supported oil prices to reach its pre-pandemic level.

Post-covid clarity and supportive govt. policies will be instrumental in charting demand-&-supply discipline, thus assigning sensibilities in printing WPI expectations in the near-term. RBI can act as catalyst for the same by resorting to out-of-the-norm practices to ensure successful transmission of rate cuts, thus meriting organization in charting interest (borrowing/lending) rates.

Click here to read MoSPI’s original press release on “New CPI For February, 2021”

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