WPI Inflation at 5.07 (week ending 24jan09) vs 5.60

2009-02-05T18:19:00.004+05:30

WPI (2007)		WPI (2008)			WPI (2009)
Date	Index	Date	Index	Inflation (%)	Date	Index	Inflation (%)
06-Jan-07	208.7	05-Jan-08	217.6	4.26	03-Jan-09	229.0	5.24
13-Jan-07	208.7	12-Jan-08	217.8	4.36	10-Jan-09	230.0	5.60
20-Jan-07	208.9	19-Jan-08	218.2	4.45	17-Jan-09	230.5	5.64
27-Jan-07	209.0	26-Jan-08	219.0	4.78	24-Jan-09	230.1	5.07
03-Feb-07	208.9	02-Feb-08	218.8	4.74
10-Feb-07	209.0	09-Feb-08	219.4	4.98
17-Feb-07	208.6	16-Feb-08	220.4	5.66
24-Feb-07	209.0	23-Feb-08	220.9	5.69
03-Mar-07	209.3	01-Mar-08	222.3	6.21
10-Mar-07	209.4	08-Mar-08	225.7	7.78
17-Mar-07	209.6	15-Mar-08	226.4	8.02
24-Mar-07	210.1	22-Mar-08	226.6	7.85
31-Mar-07	210.4	29-Mar-08	226.7	7.75
07-Apr-07	211.5	05-Apr-08	227.8	7.71
14-Apr-07	211.4	12-Apr-08	228.2	7.95
21-Apr-07	211.5	19-Apr-08	228.9	8.23
28-Apr-07	211.6	26-Apr-08	229.1	8.27
05-May-07	212.0	03-May-08	230.5	8.73
12-May-07	212.4	10-May-08	230.6	8.57
19-May-07	212.4	17-May-08	230.8	8.66
26-May-07	212.3	24-May-08	231.2	8.90
02-Jun-07	212.5	31-May-08	232.3	9.32
09-Jun-07	211.8	07-Jun-08	236.5	11.66
16-Jun-07	211.9	14-Jun-08	236.9	11.80
23-Jun-07	212.4	21-Jun-08	237.7	11.91
30-Jun-07	212.8	28-Jun-08	238.4	12.03
07-Jul-07	213.3	05-Jul-08	239.3	12.19
14-Jul-07	213.6	12-Jul-08	239.5	12.13
21-Jul-07	213.7	19-Jul-08	240.5	12.54
28-Jul-07	213.9	26-Jul-08	240.7	12.53
04-Aug-07	213.8	02-Aug-08	241.4	12.91
11-Aug-07	213.7	09-Aug-08	241.1	12.82
18-Aug-07	213.7	16-Aug-08	241.1	12.82
25-Aug-07	213.9	23-Aug-08	241.2	12.76
01-Sep-07	214.8	30-Aug-08	241.4	12.38
08-Sep-07	215.0	06-Sep-08	241.7	12.42
15-Sep-07	215.0	13-Sep-08	241.7	12.42
22-Sep-07	215.2	20-Sep-08	241.3	12.13
29-Sep-07	215.3	27-Sep-08	241.3	12.08
06-Oct-07	215.0	04-Oct-08	239.7	11.49
13-Oct-07	215.0	11-Oct-08	239.3	11.30
20-Oct-07	215.3	18-Oct-08	238.6	10.82
27-Oct-07	215.4	25-Oct-08	238.5	10.72
03-Nov-07	216.1	01-Nov-08	234.9	8.70
10-Nov-07	215.8	08-Nov-08	234.6	8.71
17-Nov-07	216.0	15-Nov-08	234.7	8.66
24-Nov-07	215.6	22-Nov-08	233.4	8.26
01-Dec-07	216.3	29-Nov-08	233.3	7.86
08-Dec-07	216.3	06-Dec-08	231.1	6.84
15-Dec-07	216.4	13-Dec-08	230.7	6.61
22-Dec-07	216.4	20-Dec-08	230.2	6.38
29-Dec-07	216.7	27-Dec-08	229.5	5.91

Comments

· Starting from first week in June08, inflation got into double digits and remained there for 21 consecutive weeks. Thereafter, the fall has been equally sharp and it is still continuing on the downtrend.

· To understand the specific reasons (commodity groups) for this drop in inflation, you may refer to http://eaindustry.nic.in/press_out.htm

· The inflation is expected to remain low at best in coming months due to not only ‘fundamental factors’, but also due to ‘base effect’.

BASIC REFERENCE MATERIAL ON INFLATION

· India releases data on weekly movement of the wholesale price index (WPI), which measures the annual inflation rate of 435 items in the basket with 1993-94 as the base year. The Department of Industrial Policy and Promotion (DIPP) in the Ministry Of Commerce and Industry acts as the nodal agency for compiling and disseminating the WPI data.

· The Office of the Economic Adviser to the Government of India, Ministry of Commerce & Industry, is introducing with effect from 1^st April 2000, the revised series of the Index of Wholesale Prices in India (Base 1993-94=100) in replacement of the earlier WPI series (Base 1981-82=100)

· A Working Group was set up by the Government under the Chairmanship of Prof. S.R. Hashim, the then Member, Planning Commission, for the revision of the Wholesale Price Index of India. Based on the recommendations of the Working Group, the Government of India decided to replace the existing series of Index Numbers of Wholesale Prices (Base: 1981-82) with a revised series having 1993-94 as the base year.

Commodity coverage

Description	No. of items	No. of items	No. of quotations	No. of quotations
	Existing 1981-82	Revised 1993-94	Existing 1981-82	Revised 1993-94
I. Primary Articles	93	98	519	455
II. Fuel, Power, Light & Lubricant	20	19	73	72
III. Manufactured Products	334	318	1779	1391
All Commodities	447	435	2371	1918

Weighting diagrams

Description	Existing (1981-82)	Revised (1993-94)
I. Primary Articles	32.30	22.02
II. Fuel, Power, Light & Lubricants	10.66	14.23
III. Manufactured Products	57.04	63.75
All Commodities	100.00	100.00

Annual WPI Averages: A comparison

Year	1981-82 series shifted to base 1993-94		Revised series (1993-94 )
	All commodities Index	Rate of Inflation	All commodities Index	Rate of Inflation
1993-94	100.0	--	100.0	--
1994-95	110.9	10.9	112.8	12.8
1995-96	119.4	7.7	121.6	7.8
1996-97	127.0	6.4	127.3	4.7
1997-98	133.1	4.8	132.8	4.3
1998-99	142.2	6.8	140.8	6.0
1999-2000	146.4	3.0	144.9	2.9

· A new Working Group has been constituted under the Chairmanship of Prof. Abhijit Sen of Jawaharlal Nehru University, for the revision of the current series of WPI (1993-94=100).

· Which is more important, the WPI or the CPI: Both are equally important. The purpose of the WPI is to capture the price change in goods from the production side. Coupled with the CPI, it gives a complete picture of the inflationary state of the economy. Any price increase is first picked up by the WPI.

· Even though more popular, using the WPI figures to measure the impact of inflation on consumers is wrong. Unfortunately, the media latches on to these numbers because they are released every week (as compared to CPI being released on monthly basis). The consumer-oriented analysis of the WPI data is completely useless. And by the time the CPI for a particular month is out, it is history. No one revises their arguments based on these figures.

· We compile the WPI data by collecting it ourselves and having it reported to us through external sources. Because of the latter, we cannot ensure that all updated prices reach us every week. So the prices of items that are not reported are assumed to be the same. However, in case of the CPI, the entire data is collected. So in terms of accuracy, it is far superior to the WPI.

INTERESTING QUOTES

“The RBI hiked rates to bring down inflation - equivalent of using a bomb to kill some rodents - because of our poorly developed financial systems.”

“This isn't the bottom. The bottom is when you're not even reading this page...“ (in the context of economic recession)

Obama will bring with him interesting times. Depressing perhaps, but interesting all the same (in the context of economic recession)

SOURCES

http://eaindustry.nic.in/

http://moneytoday.digitaltoday.in/index.php?option=com_content&task=view&id=3800

http://blog.investraction.com/

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STEEL INDUSTRY: SOME RESEARCH POINTS

WPI Inflation at 5.07 (week ending 24jan09) vs 5.60