Wholesale price inflation at 12.96% in January

India’s wholesale price inflation fell marginally to a four-month low of 12.96% in January from 13.56% in December 2021, the decline driven largely by a drop in manufactured products’ inflation below the 10% mark for the first time since last April.

Manufactured products inflation cooled from from 10.62% in December to 9.42% in January. Fuel and power inflation remained virtually unchanged from 32.30% in December to 32.27% in January, while price rise at the wholesale level hardened in January for primary articles and the food index. 

“Food inflation in January is now at a 24-month high of 9.6% from 9.2% in December, led by a sharp jump in prices of vegetables at 38.5% from 31.6% in December, and eggs, meat and fish (at 9.8% from 6.7% in December),” Bank of Baroda chief economist Madan Sabnavis pointed out.

Economists expect inflation measured by the Wholesale Price Index (WPI), which is more reflective of producers’ price pressures, to remain above the double digits after having remained above 10% through 2021-22, peaking in November at 14.9%.

“The continuous hardening in crude oil prices exacerbated by the ongoing geo-political concerns, and its impact on the Rupee, poses the biggest risk to the WPI inflation trajectory in the ongoing quarter,” said ICRA chief economist Aditi Nayar.

“In spite of an expected reversal in primary food items, we expect the WPI inflation to print between 10.5-12% in the next two months, with the hardening in crude oil prices and its eventual transmission into retail fuel prices, delaying the expected dip of the headline inflation into single-digits to the first quarter of 2022-23,” she added.

Within fuel and power inflation, the mineral oil index eased to 52.2% in January from 62.6% in December, but this was offset by electricity prices recording a 15.7% inflation, compared to -0.2% in December.

Though the wholesale price index is not used by the Reserve Bank of India for monetary policy purposes, it is a very good indicator on what is happening to the producer side with the tendency to reflect global prices more than the Consumer Price Index (CPI), Mr. Sabnavis said.