Notes on Indian equities, sectors and economy

Inflation is now moderating. WPI will fall below 10% in July

Posted by fairval on July 16, 2010

After months of massaging inflation data, the government has let it rise to above 10%.  In May and June, there is very little disparity between our data and government data. The good news for the government is – inflation is beginning to fall, it should go below 10% in July. Food grain inflation for July is already in single digits and falling. This is the main factor getting overall inflation down. Fuel inflation is running around 16% in July, thats what is keeping it up.

The table below shows the trend in recent months, and our July expectation. The chart below is from an earlier post, where we showed the huge difference between true inflation and what official data. In that chart also, u can note that our data and govt data were in tandem from Jan08 till Mar09, after which they began to diverge. Our line lies between official WPI and official CPI in that chart. We believe our data was closer to the truth.

  Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10E
Govt WPI 9.9 9.9 9.6 10.2 10.6  
WPI-Wisdomsmith 10.5 11.7 11.7 11.3 11.5 9.7

Our WPI estimate versus official data

So why did the government let WPI show a couple of reads above 10%? My guess is maybe so economists outside the government system dont lose complete faith in official stats. It is amazing government data is hardly questioned in India.


One Response to “Inflation is now moderating. WPI will fall below 10% in July”

  1. […] by fairval on August 17, 2010 This blog had written in a post ‘Inflation is now moderating. WPI will fall below 10% in July‘ a month ago, that inflation would fall below 10% for July (the data came […]

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