Bad news for your pocket? WPI inflation hits 27-month high

4.17% WPI Inflation vs 2.03% in January 2021 – what else can we learn from the numbers?

Ministry of Commerce and Industry recently released Wholesale Price Index (WPI) numbers for February 2021.

4.17% is the number and this is 27-month high. The number was 2.03% in January 2021.

Aditi Nayar, Principal Economist, ICRA, “The doubling in the WPI inflation to a 27-month high 4.2 percent in February 2021 from 2 percent in the previous month, was fairly broad-based, reflecting the rise in commodity prices brought on by the global risk-on sentiment, hardening of crude oil and fuel prices, as well as a fading of the favourable base effect for food items.”

She continues, "While the core inflation rose further to a series high 5.5 per cent in February 2021, the pace of month-on-month increase tempered, benefitting from the sequential dip recorded by basic metals."

These numbers are indicative of the hardships that the middle and lower classes of India have to face. This is more relevant nowadays when the decimation done by the pandemic COVID19 has still not been handled.

Further, in its latest monetary policy decision on February 5, the interest rates were kept unchanged. This was the fourth consecutive meeting in which no change was made to the interest rates. Though, in this meeting it was observed that the near-term inflation outlook has turned favourable.

Also read: Sensex and Nifty close lower by about 0.7%

Now, let’s look at some detailed numbers regarding inflation statistics released.

WPI Food Index was 3.31%, the index for primary articles was at 1.82%. Non-food articles inflation was down from previous month and was at -0.51%.

Nayar claimed,“Looking ahead, we expect large upticks in the WPI inflation over the next three months, as the wedge between the commodity prices and their year-ago level intensifies. We expect the headline and core WPI inflation to rise to around 6 per cent each in March 2021. Subsequently, we expect the headline WPI inflation to harden further to between 9-9.5 per cent , and the core-WPI inflation to climb to 7-7.5 per cent by May 2021, before displaying a more gradual moderation to 4 per cent each by the end of 2021.” 

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