WPI inflation hits 10 – month low

The wholesale price inflation (WPI) rate fall to a 10-month low of 2.76 percent in January,

Official figures released on Thursday showed. The inflation rate in December had stood at 3.80 percent, while it was 3.08 percent in January, 2018.

The trend is in line with the consumer price inflation rate, which declined to a 19-month low of 2.05 percent in January from 2.11 in December, according to data released in Tuesday.

Among various segments, food items saw an inflation rate of 2.34 per cent in January.

These items had witnessed deflation or fall in prices for the previous six months.

In December, the deflation rate was at 0.07 per cent

On the other hand, food items continued to see a fall in prices in the consumer price index(CPI)in January, even as the deflation rate came down to 2.17 per cent from 2.65 percent in December.

If this trend continues for a few more months, farmers might start getting reasonable prices after a long time.

However, the interpretation is subject to different structures of WPI and CPI as well as the presence of middlemen.

Fuel, power and manufactured products saw the WPI based inflation rate cooling down. It fell sharply to 1.85 percent in January, against 8.28 percent in December in the former owning to easing in prices of motor fuel and LPG.

The inflation rate was down at 2.61 percent, against 3.59 percent in this period.

We expect the wholesale inflation rate to remain around 3.5 percent by the end of the fiscal year and will be guided by recovery in the prices of food and manufactured goods. We expect oil prices to remain volatile (slightly towards the higher end) owing to removal of waivers granted by the US government on the Iran sanctions and probable supply cuts by the OPEC,”said Manisha Sachdeva, associate economist at CARE Ratings.

The Reserve Bank of India, which mainly factors in the CPI inflation rate, had cut the key lending rate by 0.25 percent this month. The decline in inflation may provide further head-room to the central bank to cut interest rate (repo) in April.

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