Using Time series analysis, analyze the impact of the wholesale price index on the price escalation in the automotive industry.

The automobile industry is a crucial sector of the economy, contributing significantly to employment and economic growth. One of the major challenges faced by this industry is the problem of price escalation, which can affect both consumers and manufacturers. In this project, we explore the impact of wholesale price index (WPI) on the price escalation of automobiles using time series analysis. We analyze the historical data of WPI and automobile prices in India from 2010 to 2022. We use statistical techniques like stationarity tests, autocorrelation analysis, and Granger causality tests to understand the relationship between WPI and automobile prices. Furthermore, we employ a SARIMA model in predicting WPI value and Vector Auto regression (VAR) model to analyze the dynamic interactions between WPI and CPI value. Our findings suggest that WPI has a significant impact on the price escalation of automobiles in India. The VAR model shows that there is a positive feedback loop between WPI, CPI and automobile prices, implying that an increase in WPI leads to a corresponding increase in automobile prices and vice versa. This feedback loop can create an inflationary spiral in the automobile industry, which can be detrimental to the economy. Our project highlights the importance of monitoring WPI and its impact on the automobile industry. Policymakers and industry experts can use our findings to develop effective strategies to manage price escalation in the automobile industry and mitigate its negative impact on the economy.