Prices in India are plummeting
The country's Wholesale Price Index (WPI) rate plunged to -4.9% year-over-year for the month of August - below the consensus expectation of -4.4.% - following July's drop down to -4.1% y/y.
This marks the tenth consecutive month that WPI has been in the negative territory. Additionally, this is the lowest since monthly prices started being tracked in 2005.
"The WPI rate may not have as much of a bearing on policy-making as the CPI rate, but the fact that it has plummeted again is unlikely to be ignored," writes Capital Economics' India economist Shilan Shah. "This strengthens our view that interest rates will be cut at the Reserve Bank of India's policy meeting later this month."
Furthermore, Shah writes that it doesn't look like things are going to bounce back anytime soon.
"Looking ahead, the WPI rate should remain low by past standards," writes Shah. "There is still evidence of spare capacity in the economy, which should keep a lid on core price pressures ... But we remain sanguine. Other factors that have a role to play in determining local food prices - such as global prices and government stockpiles - should help keep inflation anchored."
