Thursday, August 14, 2014

Perspective on WPI numbers from Kotak Mahindra Bank Limited

“Even after factoring in the price rise of vegetables, the impact on the WPI inflation was much lesser than it was for the CPI. This is because the key item of the price inflation in vegetables for July, namely tomatoes, was not a part of the accounting under WPI for July. This is because the WPI follows a seasonal based approach in pricing of seasonal crops – such as mangoes, peas, tomatoes etc. where the price quote is available only in the period when the fresh crops arrive in the markets and not during the sowing season of these crops.

 With the importance of the WPI going down for policy making purposes, we do not expect any implication of the drop in WPI for the monetary policy. RBI, in our opinion, will continue to remain guarded against the retail price rise risks that can come though aggregate demand shifts or implications of poor monsoons on agriculture. RBI is thus expected to maintain a status quo so far as its monetary policy is concerned”
By Indranil Pan, Chief Economist, Kotak Mahindra Bank Limited