Jan WPI at -0.9%, contracts for 15th straight month

January wholesale price index (WPI) has contracted for the fifteenth straight month to come in at -0.9 percent versus -0.73 percent in December. A CNBC-TV18 poll had estimated a contraction of 0.3 percent.The November data has been revised to -2.04 percent from -1.99 percent.Food articles inflation is at 6.02 percent compared to 8.17 percent last month. Primary articles inflation is at 4.63 percent versus 5.48 percent last month, while manufacturing products inflation is at -1.17 percent compared to  -1.36 last month.Among others, fuel inflation is at -9.21 percent, cereals at 1.24 percent, vegetable at 12.52 percent and pulses at 44.91 percent. 
Aditi Nayar, senior economist of ICRA expects WPI as well as core inflation to remain subdued for next couple of months unless there is sharp rebound in crude prices.

Listing out the factors that have weighed on the inflation numbers, she says, “In January, there was nearly 20 percent correction in Indian crude oil basket. But, sometimes WPI captures such significant changes with a lag. This could be a reason for the downtrend in WPI. ”  

Correction in prices of vegetables and pulses and the petrol and diesel price cuts in January might also have weighed down WPI, she added.

Below is the transcript of Aditi Nayar’s interview with Ekta Batra on CNBC-TV18.Q: We have the wholesale price index (WPI) inflation data which has come out. It is a contraction of 0.9 percent which has come in and this compares to a contraction of 0.7 percent. So, that has actually increased in terms of a contraction. So, January WPI stands at a contraction of 0.9 percent and that is way below what our expectation was. Come in on this.A: Very similar to expectation. I had pencilled in minus 0.8 so it is actually very similar. And couple of other things that would have actually kept it on the lower side was that even petrol and diesel prices were reduced in January. Portion of the pass through actually was held on by the government in terms of higher excise duties. But there were Rs 1-2 of cuts over the course of January. So, a bunch of factors really keeping the WPI index or rather weighing down on the WPI index in the month of January.Q: Based on this data, when do you expect WPI to eventually inch up into the green or start expanding?A: I do not think it is going to come back into the positive zone before the end of this quarter. So, we have been pushing ahead our expectations of when the WPI is going to stop being negative and at this point in time, it is really going to be Q1 of next year and not February or March unless there is a pretty sharp rebound in crude oil prices which does not really seem likely. Even the data we have had over the past few sessions, we have seen crude oil prices generally coming back, at least for the Indian market coming back below USD 30 per barrel. And the rupee has depreciated, but it has also pulled back in a couple of sessions. So, overall, we do think that at this point in time, WPI will remain sub-zero for the next couple of months, and so will core inflation.Q: 6 percent versus 8.17 percent for food inflation which is completely opposite to the data that we saw in consumer price index (CPI). Your reading and what might the trajectory be?A: We had actually pencilled in 6.3, so it is not very different from what we had expected and what you mentioned right now in terms of pulses and onions, perhaps even tomato and potato may have shown a dip. So, it is really these few items that have possibly pulled out the WPI food inflation. It is not always the case that the CPI, WPI food inflation necessarily move in the same direction. And sometimes, we do find that with a lag of a month, the CPI mirrors what has happened in the WPI. So, last month, if I remember correctly, we had seen an uptick in the WPI food inflation on an month-on-month (M-o-M) basis and to some extent, we have seen a very sticky CPI food inflation in the month of January. Whereas in January we have seen now, a dip in WPI inflation for food items, and maybe this is something that is an omen that we are going to get some fall in the CPI on an M-o-M basis in February. So, it is really with a lag of one month sometimes, that the trends actually do tend to move in sync.