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Wholesale price index (WPI)-based inflation for January touched a 10-month low of 2.76 per cent on the back of a sharp fall in manufactured product prices and some softening in prices of fuel and food items.
The latest WPI print is lower than 3.02 per cent inflation recorded in January last year and 3.8 per cent in December 2018.
Meanwhile, build up inflation rate in the current financial year so far was 2.49 per cent, compared to a build up rate of 2.47 per cent in the corresponding period of the previous year, official data released on Thursday showed.
The Government also revised the November WPI downwards to 4.47 per cent, from 4.64 per cent earlier.
Manufactured products inflation — which has a weightage of 64.23 per cent in WPI — declined to 2.61 per cent in January, from a level of 2.96 per cent in same month last year.
On the other hand, fuel and power inflation declined to 1.85 per cent (4.73 per cent). It was at 8.38 per cent in December 2018.
However, primary articles inflation — weightage of 22.62 per cent in WPI — has gone up to 3.54 percent in January from 2.53 per cent in same month last year. The rate of inflation based on WPI Food Index consisting of ‘Food Articles’ from Primary Articles group and ‘Food Product’ from Manufactured Products group increased from 0.07 per cent in December to 1.84 per cent in January.
Expert’s take
Madan Sabnavis, Chief Economist, CARE Ratings, told BusinessLine WPI inflation number for January has come “even lower than our expectations”. It has been driven by a sharp decline in growth rate of manufactured goods and fuel and power.
“This is likely to get reversed for manufactured products in the next two months and we can expect inflation to move towards 3.5- per cent mark,” Sabnavis said. The Rabi harvest will hold the clue to the future of primary goods inflation as well as crude oil dynamics, he added.
Rate cut
The latest decline in WPI comes on the heels of retail inflation hitting a 18-month low of 2.05 per cent in January. The softening trend may provide further head-room for the Reserve Bank of India to cut interest rates (repo) in the coming months.
It may be recalled that the RBI — which focuses mainly on retail inflation trends — had earlier this month cut repo rate by 25 basis points to 6.25 per cent. It was the first instance of repo rate cut since August 2017.
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