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Business News/ Market / Mark-to-market/  WPI inflation vs the repo rate
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WPI inflation vs the repo rate

If WPI had remained the central bank's preferred measure of inflation, it could have declared victory over inflation

Graphic: Sahil Banga/MintPremium
Graphic: Sahil Banga/Mint

India’s Wholesale Price Index (WPI) for August rose 3.74% compared with a year ago. The last time WPI inflation was so low was in late 2009 (see chart). The Reserve Bank of India’s repurchase rate, or repo rate, at the time was 4.75%, whereas it is now 8%. In other words, if WPI had remained the central bank’s preferred measure of inflation, it could have declared victory over inflation and lowered its policy rate.

But the WPI no longer carries much weight in monetary policy because the central bank has shifted the goalpost, rightly in our view, to the Consumer Price Index.

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Published: 15 Sep 2014, 05:13 PM IST
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