There is a cris-cross in the plot of WPI on Jun/06/2009. The index falling below the level COPPY. And the headline inflation dips into negative quadrant, as a rare case in past three decades. The weekly sequential growth for WPI is usually fluctiating. The range during 2007/jun/2009 is bound between +1.18 and -1.51. This leaves a scope of fulctiation of 330 bps over a fairly long time series of 156 data points. The tendency is of a simple 'mean revesion' and stationarity. The long-duree hump in 2008/9 series had computationally generated a rapid rise in inflation. Since Oct/2008 the WPI displayed a flattish growth. A 'naive' carry forward of Apr-May/2009 data is the base case scenario. This can be done on Excel by simply select and drag down.
As long as the projected blue line remains below the orange one, we may see a minus numbers computationally. This is the typical example of base effect. The computed point-to-point inflation will remain in negative quadrant during Jun/6-Oct/3/2009. This period of negativity may be shortened with a revision in the regulated domestic fuel prices. A upward revision of Re.1/litre of Diesel and Re.2/litre of Petrol will pull the Fuel index a little up and shorten the phase of negative inflation.
Leaving everything else as usual, and assuming a least gradient growth in WPI, would otherwise take the inflation up pretty fast. The FY2009/10 may end at 8 % plus inflation.
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