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Below are Perspective On WPI Data By Prof. Krupesh Thakkar, CFA, HoD, Financial Markets, ITM B-School

The Whole Sale Price Index (WPI) has hit the record high with double digits (the highest since the introduction of new 2013 series)  at 10.49% in April 2021 against 7.39% in March 2021. Though the lower base of last year (in April 2020, the WPI fell by 1% month-on-month-basis)did elevated the figure, the sequential increase seems to be a bit worrisome.

On a m-o-m basis, WPI went up by 1.86%, led by Primary Articles (+3.83%) and Manufacturing Products (1.65%). However, some temporary respite came from Fuel & Power group which fell by 1.0 % on m-o-m basis. But with the recent increase in fuel price, it can inch up again.

Owing to supply disruptions  almost all the food-articles have witnessed a rise in the month.  On the manufacturing  front, the spillover impact  of earlier rise in fuel is now being witnessed. The index was already under pressure owing to persistent rise in input costs, particularly metal prices.

Will CPI follow the same path?

Interestingly, the headline Consumer Price Index (CPI) for India came at 3 months low at 4.29% for the month of April 2021 and on a m-o-m basis, it rose by 0.7%.

Very rarely, one sees the WPI yearly inflation numbers being higher than that of CPI. With WPI being a leading indicator of CPI, the CPI numbers will also feel the pressure. Also, IHS Markit purchasing managers' index (PMI) for India has already stated the current increase in input costs is the steepest for nearly seven years. This itself indicates higher retail inflation for coming months.

Going forward, the yearly WPI figure would even inch further as the adverse base impact would be continuing for the month  of May 2021 also.

For RBI, the situation is becoming tricky as they might observe both lags of inflation rising on one hand and on another having a fear of downside risk to growth owing to the recent lockdown.

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