The Wholesale Price Index (WPI) for March 2014 shows an inflation of 5.7%, a sudden jump from February’s (now revised) 4.68%.
You will notice that the blue line dipped a bit. Last year, inflation dipped between March and May (2013) to sub 5% levels, and that’s when the index was flat. That base effect, plus the lack of similar action this year has spiked up inflation.
Looking at components, it’s all showing a reversal of a downtrend, with fuel inflation at a whopping 11%.
What might be a worry is that the green line (Manufactured Goods) is showing a rise again. Though it is low at 3%, it forms the biggest component of the index (65%) and an increase in that component will impact headline inflation the most.
At 5:30 pm today, we’ll see CPI inflation. That is what the RBI uses now, and it’s been going down. Will it go above 8.5%? That will determine the course of RBI action.