Wholesale inflation eased to 4.7% in January

India’s wholesale price inflation cooled further in January to a two-year low of 4.73% from 4.95% in December, thanks to a slight decline in manufactured products’ price rise as well as fuel and power inflation, even as the pace of inflation in food and primary articles hardened sequentially.

January marks the eighth successive month of sequential moderation in the wholesale inflation, since it peaked at 16.63% in May 2022. The moderation was helped in no small measure by base effects as January 2022 had recorded a 13.7% surge in wholesale prices.

Cereals inflation at the wholesale level sped to the highest level in nine and a half years to hit 15.5% in January, with paddy inflation at 7.2% and wheat price rise at 23.6% (up from 20.7% in December 2022).

Fuel and power inflation eased from 18.1% in December to the lowest level in 22 months at 15.2%, while manufactured products inflation eased marginally from 3.4% to 3% over the same time frame.

“Within manufacturing, cement has registered high increase of around 8.4% which will add to building costs and can affect the real estate sector. These costs could ease with fuel prices coming down,” said Bank of Baroda chief economist Madan Sabnavis, who expects wholesale inflation to dip further to end up around 4% by March.

“Decline in the rate of inflation in January, 2023 is primarily contributed by mineral oils, chemicals & chemical products, textiles, crude petroleum & natural gas, textiles, and food products,” the Ministry said.

This is the second month in a row that retail inflation, which resurged to 6.52% from 5.7% in December, is higher than the wholesale inflation rate, signalling that input cost pressures are easing for producers even as they continue to pass on the burden to consumers.

“The wedge between inflation measured by the Consumer Price Index and Wholesale Price Index (WPI) widened sharply to 177 basis points (bps) in January from 75 bps in December2022,” rating firm ICRA noted. One basis point equals 0.01 percentage point.

Food inflation, which had moderated sharply from 2.5% in November to 0.65% in December, rebounded to almost 3%. Primary articles inflation also inched up from 2.4% to 3.9% in January.

Within food items, vegetable prices fell year-on-year for the third month in a row, with the rate of disinflation easing to -26.5% from -36% in December 2022. This was largely driven by onion prices that fell for the sixth month in a row, easing 25.2% in January.

Inflation in potatoes eased to at least a six-month low of 9.8%, but most other food items clocked multiple-month highs. Milk inflation zoomed to 9% from 7% in December, pulses inflation hit a five-month high of 2.4%, and fruits hit a four-month high of 4.1% in January.

Minerals, which have a weightage of less than 1% in the WPI, reported a 9.3% deflation compared to 30% inflation a year earlier. ICRA reckoned this was an 83-month and was led by the trend in metallic minerals like copper concentrate and zinc whose prices fell 16.1% year-on-year.

The Commerce and Industry Ministry also revised upwards the wholesale inflation rate for November 2022 from an earlier estimate of 5.85% to 6.12%, based on updated responses, with fuel and power inflation for that month raised from 17.3% to 19.7%.

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