Inflation and policy response going ahead: CARE

India Infoline News Service | Mumbai |

WPI inflation would have to be monitored carefully in the light of the expected el Niño which would affect monsoon and probably the kharif harvest

The wholesale price inflation number came below the market expectations for the first month of the new financial year. Compared with a market estimate of 5.7% (CARE’s was lower at 5.4%), the inflation number for April was 5.2%. While this is higher than what it was in April 2013, it is lower than in March. This contrasts with the CPI inflation picture which was higher in April at 8.6% as against 8.3% in March.
Therefore, while the downward movement is satisfactory in wholesale prices, it would not provide any additional signal or change in direction of price movements for further policy action.
WPI inflation would have to be monitored carefully in the light of the expected el Niño which would affect monsoon and probably the kharif harvest. The important factors would be the arrival of the monsoon, progress of rainfall and spread across various geographies and crops. While the RBI’s actions so far indicates that it would be giving precedence to CPI inflation over WPI inflation, it does look as if no action would be forthcoming until a clear picture emerges on the monsoon prospects for the year.
 

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