Wholesale inflation eases to 2.3% in January

New Delhi: India’s wholesale price inflation moderated to 2.3% in January from 2.4% the previous month, as food prices fell, according to official data released Friday.“A correction in food inflation helped in the wholesale inflation edging down along with a sustained decline in prices of fuel and power,” said Paras Jasrai, senior economic analyst at India Ratings and Research (Ind-Ra).

Inflation based on the Wholesale Price Index (WPI), which tracks changes in producer prices, was 0.3% in January 2024.

“The arrival of fresh harvests has led to a seasonal correction in food prices. The outlook for agriculture remains positive, with robust kharif output and good progress of rabi sowing,” said Rajani Sinha, chief economist at CareEdge Ratings.

Retail inflation also slowed to a five-month low of 4.3% in January, according to data released earlier this week. WPI food inflation eased to 7.5% in January from 8.9% in December 2024, hitting a five-month low.

“This was almost entirely on account of a sharp fall in vegetable inflation, thereby exerting a downward pressure to the tune of 44 basis points to the headline print between these months,” said Rahul Agrawal, senior economist at ratings firm ICRA.Vegetable inflation slowed to a five-month low of 8.4% in January from 28.7% the month before. Potato and onion prices were up by 74.3% and 28.3%, respectively, in January.In contrast, fruit inflation was at a five-month high of 15.1% in January, driven by a low base effect. Wheat inflation climbed to 9.8% in January.

“January 2025 recorded higher than normal temperatures. If the prevailing temperature in February continues till March, then it will have an adverse impact on rabi crop production which can slow the easing of food inflation,” Jasrai said. So, the trend in wheat prices is a key monitorable, he added.

Inflation in manufactured products, which have a weight of 64.23% in the WPI, accelerated to 2.5% in January from 2.1% a month before. This was due to an unfavourable base effect from the previous year, said Sinha.

Within manufactured products, vegetable and animal oils and fats recorded the fastest inflation at 33.1%, followed by food products at 10.4%.

“Inflation in edible oil was due to a combination of a surge in global prices and low base effect,” said Jasrai.

Inflation in primary articles accelerated to 4.7%, while fuel and power inflation decelerated to 2.8%.

Outlook

ICRA anticipates WPI inflation to accelerate to 2.4-2.6% in February, the WPI food inflation dropping below 7%. Ind-Ra projects wholesale inflation to near 2%. “A continued depreciation in the dollar/rupee pair and tariff-related rise in global commodity prices would pose upside risks to the estimates,” said Agrawal.