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Below are Views On The WPI rises to a 27 months high at 4.17%, however no need of over panic By Prof. Krupesh Thakkar, CFA, HoD – Financial Markets, ITM B-School

The WPI increased to a 27 months high at 4.17% in February 2021, owing to a broad-based rise in sub-indices. On a month-to-month basis (m-o-m) basis, the indicator rose by 0.80%. Just in case of CPI, the unfavorable base impact has hampered the WPI figures too as in February 2020, the WPI had declined by 1.0%. Looking at sectoral indices, the respite is still coming from decline in prices of vegetables (-2.0% m-o-m), however the prices of eggs , meat and fish have gone up (1.4%). However, the rise in prices of minerals (+9.0% m-o-m), crude petroleum (+6.5%, m-o-m) and fuel group (+4.5%) can spill over to the final products. The spillover is already witnessed in the manufactured price indices which went up by 0.6% m-o-m basis and 5.85 % on yearly basis. The persistent rise, if continues, would be reflected in CPI numbers too going forward.

The upward revision in January 2021 tells can tell different story.

Though some adjustment in the provisional inflation numbers is normal, but this time the January 2021 WPI figures has been revised to 1.95% from 1.22%. This can be because not all representative prices were captured and/or the prices captured were under reported. Normally, one ignores the revised figures, which are in fact more important sometimes.

Our views still the same on RBI’s MPC stand. We still hold our view of RBI’s Monetary Policy Committee’s stance of accommodative policy with no change in short term interest rates when they meet in April 2021. However, some emphasis would be given on rising fuel prices and its impact on other products.

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