Negative Core WPI Inflation, IIP De-growth Is Disturbing: SBI

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Negative Core WPI Inflation, IIP De-growth Is Disturbing: SBI
Dipen Pradhan - 15 October 2019

New Delhi, October 15: The biggest public sector bank, State Bank of India (SBI) has shown a “serious concern” over the country’s deteriorating wholesale price index (WPI) core inflation, citing poor purchasing power. According to SBI Bank’s research arm, SBI Ecowrap, the WPI core inflation declined to 38-months low to minus 1.07 per cent in September 2019, from minus 0.49 per cent in August 2019.

“We believe that core WPI will remain in negative zone for the next couple of months and this is bad news for the economy as negative core WPI is eventually conveying lack of purchasing power, which is a disturbing sign,” SBI Ecowrap said in its research note.

The bank has also pointed out that the core consumer price index (CPI) is likely to decline below 4 per cent, indicating weak demand conditions. The consumer prices was up by 3.99 per cent in September 2019—highest CPI figure since July 2018—from last year’s level of 3.70 per cent, and month before level of 3.28 per cent.

“There is wide expectation that the prices may soften in a couple of months, once the Kharif harvest arrives in the market. Going forward, we expect better supplies on the food front which may ease the pressure on food prices,” the SBI Ecowrap report cited Soumya Kanti Ghosh, Group Chief Economic Adviser of SBI as saying.

Simultaneously, the index of industrial production (IIP), which reported a de-growth of -1.1 per cent in July 2019, has again caused serious concerns about the decelerating economy, the bank says, citing a decline in the electricity sector, which had been growing well, since the new IIP series were released.

“Power demand fell by 1.6 per cent in August and now 4.5 per cent in September. Load-shedding is now back reflecting discom inefficiencies. Meanwhile, thermal coal imports has climbed upto rose to 61 million tonnes last fiscal and it may go 200 million tonnes in 2019-20. Thus, both the Electricity and Mining sector growth will remain weak in coming months,” the report said.

Citing, ASCB’s fortnightly data, which indicate a credit-pickup of Rs 90,618 crore in September 2019, the bank said, “This is a welcome development, though we believe such credit growth may have largely from personal loan segment.”

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