India’s Wholesale Price Index (WPI) Moderates to 3-Month Low at 0.27% in Jan

India’s Wholesale Price Index (WPI) recorded a notable moderation, reaching a three-month low of 0.27% in January. This decline was attributed to reduced prices in both food articles and manufacturing products, as per data released by the Ministry of Commerce and Industry. Notably, this marks the third consecutive month of positive territory for wholesale inflation after experiencing deflation for a significant part of the previous fiscal year.

Deceleration in Food Prices

• Inflation Slows: Inflation in food prices witnessed a notable slowdown, reaching a three-month low of 6.85% in January compared to 9.38% in December.
• Leading Factors: Deceleration was observed in prices of various food items including paddy, cereals, pulses, vegetables, onion, fruit, and milk. Wheat and protein-rich items like eggs and meat also experienced contraction for the second consecutive month.

Continued Contraction in Manufacturing

• Manufactured Products: Deflation persisted in prices of manufactured products for the eleventh consecutive month in January.
• Key Sectors Affected: Notable contractions were observed in manufactured food products, vegetable and animal oil, textiles, paper, chemicals, metals, rubber, and steel.

Fuel Price Contraction

• Continued Decline: Fuel prices experienced continued contraction for the ninth consecutive month in January.
• Leading Factor: This decline was primarily driven by the ongoing contraction in prices of high-speed diesel, with petrol and cooking gas also witnessing slight deceleration during the month.

Implications on Consumer Price Index (CPI)

Impact: While the Reserve Bank of India typically monitors retail inflation for its monetary policy decisions, the moderation in WPI is expected to eventually influence the Consumer Price Index (CPI), albeit with a time lag.