WPI fell a steep -2.06 percent, marking the fourth straight month of deflation in prices. A Street poll of economists forecast WPI to come in at -0.65 percent. Data released by the government today showed year-on-year inflation fell to the lowest level since data has been tracked in the current 2005 series. WPI inflation for December was revised lower from 0.11 percent to -0.5 percent.
The contraction was led by a month-on-month decline in all three broad groups that make up the index. Primary articles were down 1.9 percent, fuel & power fell 4.43 percent, while manufactured products were down 0.26 percent. Primary articles comprise primarily of food articles; fuel & power group is made up from coal, oil and electricity; manufactured products comprise of food products, textiles, chemicals and basic metal.
Although sharp fall in WPI index RBI may not further rate cut due to increase in service tax and excise duty in the budget which can boost the WPI on upside as it has low base now.