Wholesale inflation eases to a four-month low of 0.2% in February

Wholesale inflation eased to a four-month low of 0.2% in February compared with 0.27% in the previous month, despite an increase in food prices as input cost pressures remained benign, data released Thursday showed.

“Overall, the wholesale price inflation trajectory is broadly reflective of benign input cost pressures. The easing in food prices has now faded, thus, the trajectory of cereal prices needs to be watched for signs of persistence,” said Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays.

Economists indicate that correction in global commodity prices has kept inflation in check and the trend is likely to continue in the coming month as well.


“Correction in global commodity and energy prices have aided in moderation of WPI inflation in fuel and power and manufactured products. Despite fading of supportive base, the WPI inflation is expected to remain range bound around 1% in the next month,” said Rajani Sinha, chief economist, CareEdge.

Consumer inflation was largely flat in February at 5.09%, with high food inflation preventing further easing.

The Monetary Policy Committee of the central bank is likely to hold the policy rate at 6.5% for the seventh consecutive time at its April meeting on the back of strong growth performance.

Sequentially, WPI was almost flat, with no change in manufactured products and a 0.3% rise in the food basket.

Manufactured products decline, food rises
Among the three major categories, manufactured products, which account for nearly two-thirds of the wholesale basket, slipped further in January to a 1.3% decline compared with a 1.1% decline in January, whereas inflation on primary articles rose to 4.5% last month from 3.8% earlier.

Wholesale food inflation was up 7% in February from 6.9%, with cereals rising 6.6% from 4.1% earlier and pulses 18.5% costlier than the previous year.

Sequentially, too, cereal prices were up 1.4% in February, wheat rose 2%, whereas paddy was up 1.2%.

“Rice production is expected to be lower than the previous year, based on the Ministry of Agriculture's first advance estimates. Government wheat stocks are lower now following the intervention to boost domestic supplies and temper price increases, as rabi harvest arrivals are still some time away (March-April),” Bajoria pointed out.