Mon May 14 01:30:00 CDT 2018

Actual Previous
Y/Y % change 3.18% 2.47%
M/M % change 0.69% 0.17%

India's wholesale price index increased by 3.18 percent on the year in April, picking up from 2.47 percent on the year in March, and advanced 0.69 percent on the month, after an increase of 0.17 percent previously. This is the first increase in WPI inflation since November and is broadly in line with Reserve Bank of India forecasts for price pressures to strengthen over the year.

The increase in WPI inflation in April reflects stronger gains in food and fuel prices. Food prices, which account for around 15 percent of the index, advanced by 0.87 percent on the year in April, rebounding from a decline of 0.29 percent in March, with vegetable prices dropping by 0.89 after falling 2.70 percent previously. The year-on-year increase in fuel and power prices (around 13 percent of the index) picked up from 4.70 percent in March to 7.85 percent in April, while inflation for manufactured products (around 64 percent of the total index) increased from 3.03 percent to 3.11 percent.

Consumer price index data for April are scheduled for release later today.

The Wholesale Price Index (WPI) covers primary articles, manufactured products and fuel and power. The data are not seasonally adjusted and the main focus in on the annual change in the index. This can be seen as an indicator of pipeline price pressures and is a loose leading indicator of consumer price inflation as targeted by the RBI.

The Wholesale Price Index is closely followed as an indicator of inflation by the Reserve Bank of India, as well as many Indian corporations and banks.

Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the WPI influence the markets - and your investments.

Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.

By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the WPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.