- Wealth PMS (50L+)
Inflation on the Wholesale price Index (WPI) has come in at 6.46%, up from August’s 6.1%, and showing a pronounced uptrend.
The index graph has now inclined significantly upwards (green line below). Last year, October to December were “flat” months on the index, so going forward our inflation metric might show much higher figures.
Component wise, primary articles shows a linear rise up to over 13% (this is mostly food). Fuel inflation is still at 10%+.
The hardly believable fact is that manufactured goods is only at 2.03%, and is totally different from everything else. I strongly believe this is just bad data collection, and not really a reflection of the underlying economy.
Revisions: July data which was first announced at 5.79% is now revised up to 5.85%. This is only a marginal increase.
Impact: There is an RBI quarterly policy towards the end of October. That policy is influenced by inflation data. Since there was a repo rate hike last month to 7.5% (with an MSF rate reduction to 9% earlier in October), confusing signals remain about what happens to rates. It’s likely that MSF rates remain at 9% and repo is hiked to 8% given this inflation data.