WPI Inflation to ease further in coming months: Survey

Despite the Wholesale and retail Inflation moving in opposite directions, the government today exuded confidence that the headline Wholesale Price Index (WPI) based inflation will ease to the range of 6.2% to 6.6% in March 2013, primarily on the back of falling prices in the non-food manufacturing sector and global commodity prices.

The WPI or wholesale Inflation eased to three-year low of 6.62% in January as compared to 7.23% in the same month last year.

On the other hand, the Consumer price index (CPI) based or retail inflation continued to be in double digits at 10.79% against 7.65% in the same month last year.

The survey maintained that there is a view amongst economists that the retail inflation should be considered for policy measures as it impacts the common people more closely.

Meanwhile, on food inflation, the survey said, “Food inflation has been particularly elevated over this period, contributing to an average of one third of total inflation.”

Food inflation based on WPI was at 9.05% in the third quarter of the current fiscal. The CPI based food inflation in the same period was at 12.10%.

“The persistently elevated prices for animal products (eggs, meat and fish), the rise in the prices of cereals and vegetables, along with the increase in international prices of fertilisers (non-urea) and the increase in administered prices of diesel have contributed to inflation in differing degrees over time,” the survey said.

On the reasons behind persisting high inflation, the survey also said, “In Q2 of 2012-13, 19 commodity groups with a 28.68% weight in WPI contributed 64.38% to total inflation.” The commodity groups include food items like cereals, oil seeds, vegetables and diesel.

Prescribing ways to control the price rise, the Survey said: "Apart from monetary policy attempting to control demand, supply side responses will be necessary to bring down inflation in a sustained way, and ongoing policy initiatives need to be pursued." While in the long run, measures to increase supply are the only way to have non-inflationary growth, it said.