MUMBAI: The Whole Price Index (WPI), that came at a surprisingly high level of 7.5% for November, is estimated see a sharp fall in December, economists said. A report by Barclays, December WPI can soften by about 100 basis points on softer vegetables price.
"Importantly, the jump in inflation prints in recent months had been driven almost entirely by vegetable prices - which have recorded an unusual spike of nearly 80% year-on-year during (the second half of 2013) so far (the highest since 1998), overshadowing disinflationary trends in several other commodities, in our view," Siddhartha Sanyal and Rahul Bajoria of Barclays said in a note. "Of the almost 300bp uptick in WPI inflation since May, vegetables have contributed nearly 200bp despite the tiny weight (1.7%) of this category in the WPI basket. WPI ex-vegetables (98.3% of index) was ~5.5% year-on-year in November, well below the headline rate of 7.5%," the note said.
A report by SBI too mentions about the possibility of WPI moving southward from here. "The WPI inflation trajectory will move down from Dec '13 onwards, but we maintain that the downside may be capped and some CPI-WPI convergence may be visible in coming months," said Soumya Kanti Ghosh, chief economic advisor, SBI in a note. "We have now revised our average WPI for FY14 at 6.7%. CPI trajectory should bring in more comfort, with the CPI numbers hitting a sub 9% by Mar '14. WPI March-end numbers may be at 7.2%, with an upward bias," Ghosh wrote.
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