WPI inflation at over 5-year low; ups hopes of another rate cut

The continued fall in petrol and diesel prices dragged the Wholesale Price Index (WPI)-based inflation for January to a five-and-a-half year low of (-) 0.39 per cent.

The last time the WPI inflation hit such a low was in June 2009 at (-) 0.4 per cent.

The WPI has declined from 3.85 per cent in August 2014 to (-) 0.39 per cent. Prices of food articles — which have a 14 percentage weight in the WPI — have, however, risen in recent months. Manufacturing-based inflation was static.

Saumya Kanti Ghosh, SBI’s Chief Economic Advisor, told

BusinessLine that he would not read the WPI moving into negative territory as a “deflation” situation although “demand conditions are weak”.

The WPI inflation entering the negative territory raised hopes of a rate cut by the Reserve Bank of India.

“It is now a given that the RBI will go in for another 25 basis point policy rate cut. This could happen even before the Budget,” said Saumya Kanti Ghosh.

The WPI inflation for November was revised to (-) 0.17 per cent from the initial estimate of zero per cent.  

Srivats.kr@thehindu.co.in