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WPI Inflation to further ease in 2013

The anticipation lower core inflation would create space for monetary easing by the Reserve Bank of India in early 2013- CRISIL

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report expects Wholesale Price Index (WPI) based inflation to moderate through in 2013. They feel so as the core inflation would remain relatively benign, reflecting a delayed impact of a sharp slowdown in GDP growth this year.

Further during the January-March period fuel based inflation is also likely to come down sharply looking at the base affect. January-March’12 period had seen crude prices averaging at $117 a barrel which was very high. November itself had seen Inflation in non-administered fuels fall to a 3-year low of 3.8% as international crude oil prices fell to their lowest levels since August. This base affect would help despite upward revision of administrated fuel prices.

The upward revision of administered fuel price was imperative to rationalize consumption and lower fiscal deficit and could continue to exert pressure on in 2013. The anticipation lower core inflation would create space for by the Reserve Bank of India in early 2013 they add.

November had seen some respite with WPI-based inflation declining to 7.24% in November from 7.45% in October. This was attributed primarily due to a decline in core and non-administered fuel inflation. Core inflation – as measured by non-food manufacturing inflation – fell sharply to 4.5% in November from 5.2% in October. CRISIL Core Inflation Indicator had also declined to 5.7% from a peak of 6.5% in September. The moderation in core inflation as per the report indicates that the pass-through of fuel price revisions into manufacturing prices has not been significant due to slowing demand in the economy.

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