As Feb WPI hits 27-month high, ICRA expects sharp increases in next few months
The wholesale price index (WPI) in February rose to its 27-month high to 4.17 percent as against 2.03 percent a month ago in January, according to the government data released on Monday. Aditi Nayar, Principal Economist at ICRA shared her views.
The wholesale price index (WPI) in February rose to its 27-month high to 4.17 percent as against 2.03 percent a month ago in January, according to the government data released on Monday. Aditi Nayar, Principal Economist at ICRA shared her views.
“We had expected a pretty big jump in WPI inflation, so we pencilled in that it would rise to 3.9 percent and it is 20-30 basis points (bps) higher than what we had forecasted. This is a very big jump,” she said.
“We thought that core inflation will jump to about 6 percent this month and it is closer to about 5.8 percent or so. It is a steady increase on the core for several months now and we expect this to continue over the next few months. We are afraid that core could go high at 7-7.5 percent by the middle of this calendar year,” she added.
“Particularly in terms of the pass-through to CPI, the textiles and the edible oil numbers are pretty worrying because those will have a very big weightage on the CPI as well. So that is something that we need to look out for in terms of hardening the inflation pressures on CPI going forward,” she stated.
“Otherwise for the WPI, we need to be braced for very sharp increases over the next few months because they are now going to be looking at the turnaround. Last year we had very low commodity prices during the lockdown period and beyond and this year we are looking at very steady rise. So we are going to get a very bad double-whammy in the next few months. Headline WPI is something that we expect will top out between 8.5 and 9 percent in Q1 and the core WPI we think is going to top out somewhere between 7.5 percent in Q1, so we should be prepared for the numbers getting this ugly,” she pointed out.
For the full analysis, watch the interview
(Edited by : Abhishek Jha)
First Published: Mar 15, 2021 5:34 PM IST
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