In January, factory inflation measured by the wholesale price index (WPI) followed a different trajectory than retail inflation, decreasing to 4.73 per cent from 4.95 per cent in December.
On Monday, National Statistical Office (NSO) reported retail inflation based on Consumer Price Index at 6.52 per cent in January as against 5.72 per cent in December.
“Decline in the rate of inflation (WPI) in January is primarily contributed by mineral oils, chemicals & chemical products, textiles, crude petroleum & natural gas, textiles, and food products,” a statement issued by Commerce & Industry Ministry said. Though WPI is more of academic nature, still it is being tracked to see impact on retail inflation.
Inflation in food articles, however, rose to 2.38 per cent in January, from (-) 1.25 per cent in December, 2022. Inflation in pulses was 2.41 per cent, while in vegetables was (-) 26.48 per cent. Inflation in oil seeds was (-) 4.22 per cent in January, 2023. Fuel and power basket inflation eased to 15.15 per cent, from 18.09 per cent in December 2022. In Manufactured products it was 2.99 per cent, against 3.37 per cent in December, 2022.
Commenting on the latest number, Mohit Ralhan, Chief Executive Officer with TIW Capital says the downward trend in WPI has been continuing since May-2022, while the YoY CPI change numbers have been more volatile. If we just look at the absolute level of the CPI index, then it has remained between 175 and 177 since September 2022. Reading this data together with WPI indicates that inflation is likely to trend downward in the coming quarters as well. On the downside, there was a significant climb up in food inflation within the WPI composition, therefore is need to remain cautious.
RBI will continue to wait for more evidence of a structural decline in inflation before pivoting its policy stance. Also, global macroeconomic factors have still not eased and RBI also needs to closely monitor the policy roadmap taken by US Fed and assess its impact on India. The economy is at a critical point where now both inflation and growth need equal policy attention,” he said.