WPI inflation turns positive after 17 months. Why that’s reason to worry.
The fall in wholesale prices inflation is in divergence with the rise in retail inflation for January. Consumer Price Index (combined)-based inflation rose to a 17-month high of 5.69 per cent in January.
This is the 15th straight month since November 2014 that deflationary pressure persisted and wholesale inflation has remained in the negative zone.
Though the pace of deflation has been weakening since last four months, high food prices continue to remain a cause of concern.
The headline inflation has been negative since November 2014 while it was 2.38 per cent in Sept.
Pronab Sen said that the divergence between WPI and retail inflation would gradually equalise.
Given the deflationary trend, globally and at home, the RBI needs to urgently review its monetary policy stance.
While the RBI criticises policy, it does not use its own limited authority effectively.
The headline inflation was at -2.06 per cent in February. It was 6 per cent in March 2014.
However, the food prices remained high, according to the the data released.
RBI may soften its policy stance in the forthcoming monetary policy review in February.
The big picture points to the need for significant monetary easing.
Fuel and power index also declined by 0.3 per cent due to lower price of petrol.
Across the world, WPI has been replaced by PPI given its comprehensive nature.
The PPI provides a broader coverage in terms of products and industries and it also includes services, something which is not a part of the WPI.