Chennai: The lower Wholesale Price Index (WPI) inflation last month is primarily due to favourable base of last year and some easing in fuel, power and manufactured products category, said the top economist in CARE Ratings.
India’s WPI inflation for last month was 4.73 per cent, said the Ministry of Commerce and Industry on Tuesday.
Curiously on Monday, the Indian government has said the retail inflation for last month was 6.5 per cent, higher than the rate for December and November 2022.
Reacting to the WPI inflation number Rajani Sinha, Chief Economist, CARE Ratings told IANS: “WPI inflation cooled further in January primarily owing to a favourable base of last year and some easing in fuel and power and manufactured products category.”
She said the moderation was, however, marginal as an uptick in food and metal inflation limited the downside. The lower print for wholesale inflation is despite a spike in the retail inflation, which breached RBI’s upper tolerance band in January.
“Two factors could explain this divergence. First, WPI inflation has support from a favourable base and second, manufacturing segment which contributes more than 60 per cent to the wholesale basket continued to witness moderation in inflation.
Additionally, food categories such as cereals, milk and pulses which were the main culprits for the spike seen in retail inflation in January have lower weight in the WPI basket,” Sinha said.
Sinha expects WPI inflation to continue on the downward trend till the first quarter of the next fiscal provided there are no unpleasant surprises relating to global commodity prices.
“For the next financial year (FY24), we expect WPI inflation to average around three per cent, lower than the estimated 9.3 per cent for FY23. The critical aspect would be to watch out for risk of resurgence in commodity prices on the back of increased demand from China or any further global supply bottlenecks,” Sinha remarked.
–IANS
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