WPI-based inflation at -2.06% in February

Index sees fourth straight monthly decline, mainly because of low crude oil prices

Wholesale Price Index (WPI)-based inflation for February 2015 provisionally stood at -2.06 per cent compared with -0.39 for January and 5.03 per cent for the corresponding period last year, on the back of plunging crude oil prices.

The fall was greater than anticipated. Analysts polled by Reuters had forecast WPI at -0.70 per cent for February.  

Data released on Monday showed that fuel and power prices (which have a weightage of 15 per cent in the index) were down 14.7 per cent year-over year, and lower by as much as 15.4 per cent when compared to the beginning of the financial year 2014-15.

WPI for primary articles, which account for 20 per cent of the index, rose 1.43 per cent, while manufactured products, accounting for 65 per cent of the index, were almost flat compared to the same period last year. Food prices remained a cause for concern though, with food articles inflation at 7.74 per cent.

This was the fourth straight monthly deflation in wholesale prices, partially bolstering the case for Reserve Bank of India (RBI) Governor Raghuram Rajan to further cut repo rates in the near future. The next RBI monetary policy meet is on April 7, although Rajan has shown a penchant of cutting rates outside such meetings.

RBI primarily focuses on Consumer Price Index (CPI)-based inflation, for which it has been set a target of below six per cent by January 2016, according to the monetary policy framework. CPI inflation for February, released on Friday, was 5.37 per cent, compared with 5.19 per cent in January.

Economists say the trend in inflation data might have little bearing on Rajan cutting rates.

“Elevated food inflation in CPI and WPI remains a cause of some concern,” said Aditi Nayar, senior economist at ICRA.

WHOLESALE RELIEF? WPI-based inflation (% YoY)