New Delhi, Feb 14: The wholesale price-based inflation declined to 2-year low of 4.73% in January on easing prices of manufactured items, fuel and power, even though food articles turned expensive.
This is the eight straight month of decline in the rate of wholesale price-index (WPI) based inflation.
It was 4.95% in December 2022 and 13.68% in January last year.
“Decline in the rate of inflation in January, 2023 is primarily contributed by mineral oils, chemicals & chemical products, textiles, crude petroleum & natural gas, textiles, and food products,” the Commerce and Industry Ministry said on Tuesday.
The decline in the rate of price rise was mainly due to a favourable base effect, economists said, adding that going forward, softening commodity prices would help ease WPI inflation further.
Although inflation in manufactured items softened, in the case of food articles it rose to 2.38 % in January, from (-) 1.25 % in December, 2022.
Inflation in pulses was 2.41%, while in vegetables it was (-) 26.48 %. Inflation in oil seeds was (-) 4.22 % in January, 2023.
Fuel and power basket inflation eased to 15.15%, from 18.09 % in December 2022. In manufactured products it was 2.99 %, against 3.37 % in December, 2022.
Deloitte India, Economist, Rumki Majumdar said high base effect and falling global prices are aiding in reduced manufacturing prices.
“We expect the cost of production to remain steady in the near future. Rising food prices are keeping the inflation index higher, which is of concern. Higher food prices also contributed to a higher CPI,” Majumdar said.
Bank of Baroda Chief Economist Madan Sabnavis said WPI inflation may be expected to trend further downwards in the next two months and could end at closer to 4 per cent by March.
India Ratings & Research Chief Economist Sunil Kumar Sinha said it expects the wholesale inflation to cool off further to 3.7 % in February 2023 due to the high base effect (February 2022: 13.4 %) and softening of global commodity prices.
The deceleration in January WPI comes in contrast to the retail inflation data released on Monday which showed consumer price index (CPI) or retail inflation rose to 6.52 per cent in January, from 5.72 % in December, 2022.
In its monetary policy review last week, the RBI hiked policy rates by 25 basis points to 6.50 % saying core inflation still remains sticky.
Consumer price index-based inflation had moved below the upper tolerance level of 6 per cent during November-December 2022, driven by a strong decline in prices of vegetables.
Assuming an average crude oil price (Indian basket) of USD 95 per barrel, RBI bettered inflation projection for current fiscal to 6.5 % in 2022-23, from 6.8 % predicted earlier. In the January-March quarter, the RBI expects retail inflation to average at 5.7 %.
Barclays, MD & Head of EM Asia (ex-China) Rahul Bajoria said risks of another rate hike in April have risen after the retail inflation print, in which bulk of the upside was driven by food prices, and not by core inflation. (Agencies)
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