If you see this week also it came down by 56 basis points from 3.92% to 3.36%, due to fall in the prices of fruits, vegetables & some manufactured goods in the wholesale market. [May not applicable to retail market as retailer may be paying still higher prices only to above mentioned items]
And there is a news of possibility of reduction of diesel prices today. If that happens it may affect the WPI series further as Oil sector has nearly 17% to 18% weightage in WPI content.
Many times I mentioned about the how WPI series has disadvantage in measuring the exact inflation due to "BASE EFFECT". Here I got one more fact regarding this issue to show you guys. CNBC TV channel did a survey, according them expected the inflation & WPI is as follows...
Inflation expectations - WPI 2008 versus 2009
Here if you look at the WPI of 2009, from March, you can notice [marked with red color] the Inflation is coming down even though is there no change in WPI measurement. In the above table from March 7 WPI series is kept constant @ 227.6 but due to "BASE EFFECT OF 2008" Inflation is coming down. And as I mentioned in December, this table is also indicating that from the month of April we may face the "DEFLATION" for couple months. If prices really starts coming down in retail markets also then there is surely problem for central banker & governments.
In addition to this, third stimulus package in terms of tax reduction also will come into the picture for next couple of weeks. Since there is reduction of 2% in Excise, Service, Cement & for Naptha will add to further fall of inflation. Because Oil & Manufacturing sector have substantial weightage in WPI series.
So considering all these factors, there is sure chance of RBI action in terms of cutting down the rates. Because dealing with Inflation is quite easy as compared to that of Deflation. Lets wait & watch...
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