WPI inflation rises to 2.03% in January

FOOD INFLATION BASED ON THE WPI FOOD INDEX SLID FROM 0.92% IN DECEMBER TO -0.26% IN JANUARY

The rate of inflation based on the wholesale price index (WPI) was up from 1.22% in December to 2.03% in January on the back of a sustained rise in the price of manufactured items, negating the weakness in energy prices and some primary food items, official data showed on Monday.

Prices of manufactured items, which make up about 64% of the WPI index, have been accelerating since last June in line with the pick-up in economic activities and demand following the covid-led nationwide lockdown.

Out of the 22 groups of manufactured items, prices rose for 18 groups, including furniture, motor vehicles, machinery and equipment, while the prices fell for only four groups.

In the fuel and power category, crude petroleum, petrol and diesel prices witnessed continued weakness during the month but to a lower extent than in December.

Food price inflation has been cooling since September. While cereal, vegetable, potato and onion prices declined in January, pulses became costlier. Accordingly, food inflation based on the WPI food index slid from 0.92% in December to -0.26% in January.

Data released by the commerce ministry shows that WPI inflation has firmed up in January, while consumer price index (Cpi)-based inflation eased to 4.06% in January from 4.59% in December.

The inflation rate of fuel and power stood at -4.8%, remaining in the negative zone for the 11th consecutive month, but recovered from -8.7% seen in December.

Benign crude oil prices have led to sustained deflation over the past one year. The recent uptick in crude oil prices has led to moderation in the negative growth, said Aditi Nayar, principal economist, ICRA Ltd.

Growing demand and strengthening pricing power will make core inflation rise further to 7-7.5% in April-june 2022, she said.

Inflation for manufactured products rose from 4.24% in December, and 0.59% in January 2020 to 5.13% last month, reflecting an improvement in the pricing power of firms.

“Wholesale prices are likely to register an uptick in coming months, with a sustained surge in the manufacturing segment owing to firming up of global metal prices following the opening up of the economy. Additionally, the noticeable jump in crude oil prices recently could also weigh on the overall wholesale inflation,” Madan Sabnavis, chief economist, Care Ratings Ltd, said in an analysis.