October 16 2017

Wholesale Price Index (WPI) of India

WPI inflation in India cools to 2.6% YoY in September as food inflation (WPI food index) dips close to 2% YoY.

Published monthly by Ministry of Commerce and Industry. Updated till the month of September 2017. (Published on October 16th, 2017) 
Note: WPI Food Index consists of ‘Food Articles’ from Primary Articles group and ‘Food Product’ from Manufactured Products. 

Recent Data Trend

The all-India wholesale level inflation, as measured by the Wholesale Price Index(WPI), eased to 2.6% YoY in September from a 4-month high of 3.24% YoY in the previous month. The fall in WPI inflation was led by a sharp dip in food inflation, as measured by WPI food index, to 1.97% YoY in September 2017 from a high of 4.41% YoY in August. The dip in WPI inflation was contrary to the market expectations (Reuter's Poll) of an increase in WPI inflation to 3.41% YoY. Further, the fall in inflation was helped by a high-favorable base effect, which is likely to be there till end-December 2017.

Apart from a sharp dip in food inflation due to continued deflation in pulses (24.26% YoY) and potato (46.5% YoY), primary articles and fuel group also witnessed a fall in inflation. The inflation in the primary articles eased to 0.15% YoY in September from 2.66% YoY in the previous month. The fuel and power group also witnessed a fall in inflation to nearly 9% YoY from almost 10% YoY growth in the previous month, mainly due to cool down in prices of petrol. Further, the reduction in excise duty by Rs.2 on petrol by the central government followed by the reduction in the VAT on petrol by various states is likely to lower inflation in the fuel group in the coming months.

However, the manufactured products recorded a slight increase in inflation to 2.72% YoY from a 2.45% YoY growth in the previous month, owing to the rise in inflation in the basic metals and chemical products. In addition, the core WPI (WPI inflation excl. WPI food index and fuel group) rose to a 5-month high of 1.9% YoY in September.

The fall in WPI inflation comes after the CPI inflation stood flat in September at 3.28% YoY. We (IMA) believe, even though the September month witnessed a fall in WPI inflation mainly owing to the fall in food inflation, the core WPI depicts that inflation is on the rise. Also, the fall in food inflation helped the CPI inflation steady, however, the core CPI inflation rose to a 6-month high of 4.52% YoY in September.

Despite the inflation at both levels (retail and wholesale) undershooting MPC's expectations, RBI may keep the interest rates on hold in its December policy statement as the core inflation measures point to a consistent rise in inflation. The pressure is mounting on the RBI as it needs to counter the growth slowdown and muted investment and keep inflation below its medium-term target of 4% YoY. The RBI increased its inflation forecast for the second half of the fiscal year 2017-18 to 4.2-4.6% from its August projections of 4-4.5%.

Brief Overview

Wholesale Price Index (WPI) represents the price of representative commodity basket of 697 items at the wholesale level i.e. goods traded in bulk and between organizations, not the end consumers. It is a measure of inflation at the wholesale level. The major components of WPI include Manufactured Products, Primary Articles, Fuel, and Power in the decreasing order of weight-age to the stated components. The purpose of the WPI is to monitor price movements that reflect supply and demand in industry, manufacturing, and construction. This helps in analyzing both macroeconomic and microeconomic conditions.

The WPI inflation has remained in the negative zone for the entire year of 2015 owing to the weak global prices of oil. The wholesale prices fell by 5.1% in August 2015, the highest fall of all time.

The  Office of the  Economic  Adviser in the  Department of  Industrial  Policy and Promotion,  Ministry of  Commerce  &  Industry is responsible for compiling  WPI and releasing it. Since 1947 the index is being published regularly. The latest series of WPI uses the base year as 2011-12.

For more information please visit the official website.  

Wholesale Price Index, Sub-group: Manufacturing

Wholesale Price Index, Sub-group: Primary Articles

Wholesale Price Index, Sub-group: Fuel and Power

Next Release Date: November 14th, 2017