Commodity prices drive WPI inflation to 27-month high in February

Firmer commodity prices drove wholesale inflation in India jumped to an above two-year high in February, official data released Monday showed.

The Wholesale Price Index (WPI) inflation was 4.17% in February, higher than 2.03% in January and was led by a rise in fuel and food inflation thereby firming up manufactures’ pricing power. The previous high of 4.47% was in November 2018.

Both food and fuel inflation turned positive last month and rose 1.36% and 0.58%, respectively. Manufactured products’ inflation hardened to 5.81% from 5.13% in January.


“The doubling in the WPI inflation to a 27-month high 4.2% in February from 2% in the previous month, was fairly broad-based, reflecting the rise in commodity prices brought on by the global risk-on sentiment, hardening of crude oil and fuel prices, as well as a fading of the favourable base effect for food items,” said Aditi Nayar, principal economist, ICRA.

Inflation in onions was 31.28% compared to -32.55% in January while that in fruits rose 9.48% from 3.08% in the trailing month. Pulses witnessed inflation of 10.25%, higher than 7.92% seen in January.

Among manufactured items, inflation firmed up in beverages, textiles, wood products, paper products, chemicals, and rubber and plastic goods.

“The rate of inflation based on WPI Food Index increased from -0.26% in January, 2021 to 3.31% in February, 2021,” commerce and industry ministry said in a statement.

Nayar said core WPI inflation rose further to a series high 5.5% in February.

Official data released last week showed India’s retail inflation rising to a three-month high of 5.03% from a 16-month low in January.

Economists expect WPI to rise going ahead.

“Looking ahead, we expect large upticks in the WPI inflation over the next three months, as the wedge between the commodity prices and their year-ago level intensifies,” Nayar said, adding that the headline and core WPI inflation could rise to around 6% each in March with the headline WPI inflation likely to harden further to between 9-9.5% by May before displaying a more gradual moderation to 4% each by the end of 2021.