Feb WPI inflation falls to all-time low of -2.06%. Inflation, as measured by the wholesale price index (WPI), fell to a steep -2.06 percent, marking the fourth straight month of deflating prices.

Inflation, as measured by the wholesale price index (WPI), fell to a steep -2.06 percent, marking the fourth straight month of deflating prices. A CNBC-TV18 poll of economists forecast WPI to come in at -0.65 percent. Data released by the government today showed year-on-year inflation fell to the lowest level since it has been tracked in the current 2005 series. WPI inflation for December was revised lower from 0.11 percent to -0.5 percent. The February contraction was led by a month-on-month decline in all three broad groups that make up the index. Primary articles (index weightage: 20.11 percent) were down 1.9 percent, fuel & power (weightage: 14.91 percent) fell 4.43 percent, while manufactured products (weight: 64.97 percent) were down 0.26 percent. Primary articles comprise primarily of food articles; fuel & power group is made up from coal, oil and electricity; manufactured products comprise of food products, textiles, chemicals, basic metals among others. “At -2 percent, this is clearly more than what we had expected,” Gaurav Kapur, senior economist at Royal Bank of Scotland NV told CNBC-TV18. 

“Barring oil, we have seen softening of commodity prices continuing globally. That has led to the decline.” The deflation in WPI contrasts with the more-broadly-tracked consumer price index (which forms the base for monetary policy decisions) and which has risen slowly but steadily over the past few months – the February number being at 5.37 percent. Much of the gap comes from the difference in weightages of food (15 percent in WPI versus 50 percent in CPI), and whose prices have been strong recently. As a result, the strong fall in wholesale inflation was unlikely to stir the Reserve Bank of India into cutting interest rates more aggressively, experts said. This was witnessed in bond yields -- yields fall if expectations of a rate cut increase -- which remained relatively unchanged as the data came out. "This is just another number for the bond market," Ashutosh Khajuria, treasury president at Federal Bank, said. "It will not bring in any cheer [to the market]." Siddharth Sanyal, chief India economist at Barclays, said that while he expects CPI inflation too to trend lower during the first half of the year, it may spike up during the second half -- especially if oil or vegetable prices increase. “This may give reason for the Reserve Bank of India to go slow on its rate cut cycle,” he said, adding that he expects only one 25 basis point rate cut before June and a pause thereafter. Source: MoneyControl