Feb WPI inflation at 6.84%; increases challenge for RBI

Updated: Thursday, March 14, 2013, 12:13 [IST]

The Wholesale Price Index inflation for the month of Feb 2013 has come in at 6.84 per cent, higher then consensus estimates, increasing the challenge for the RBI when it meets on March 19 to decide on interest rate cuts.

Non foods manufactured inflation has fallen to 3.8 per cent from 4.1 per cent month on month. Feb manufactured inflation has come in at 4.51 per cent, vs 4.81 per cent month on month.

The index for Beverages, Tobacco & Tobacco Products group rose by 1.0 percent to 178.8 (Provisional) from 177.0 (Provisional) for the previous month due to higher prices of dried tobacco (11%) and rectified spirit, soft drinks & carbonated water and imfl - blended (1% each).

The index for Textiles group declined by 0.2 percent to 133.1 (Provisional) from 133.4 (Provisional) for the previous month due to lower prices of woollen textiles (2 per cent) and man made fabric (1%). However, the prices of cotton yarn, jute sacking bag, gunny and hessian cloth, jute yarn, man made fibre and tyre cord fabric (1 per cent each) moved up.

The index for Paper & Paper Products group rose by 0.4 percent to 138.3 (Provisional) from 137.8 (Provisional) for the previous month due to higher prices of paper rolls, cream laid woven paper, paper cartons / boxes, paper for printing / poster, maplitho paper and laminated paper (1 per cent per cent each). However, the prices of paper pulp (8%) declined.
Today's inflation data makes the probability of interest cuts even dimmer, given that the consumer price index level for February was also at an uncomfortable level.

However, analysts are betting on the RBI to cut rates by 0.25 per cent, despite the high inflation given that growth in the economy has deteriorated. The Reserve Bank of India last cut policy rates in January by 25 basis points.

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