Wholesale inflation in India jumped to the highest since February as prices of manufactured products rose.
The Wholesale Price Index-based inflation stood at 2.03% in January 2021 compared with 1.22% in December, according to data released by the Ministry of Commerce and Industry on Monday. A Bloomberg poll of 19 economists estimated WPI inflation at 1.14% for January.
WPI inflation picked up even as primary articles contracted for the second straight month.
A deeper disinflation in primary food articles helped to cushion the impact of a sharp rise in core inflation to a 27-month high of 5.1% in January 2021. In our assessment, rising demand and strengthening pricing power will make core inflation rise further to as much as 7.0-7.5% during Q1 FY2022.Aditi Nayar, Principal economist, ICRA.
The Consumer Price Index-based inflation, however, touched a 16-month low at 4.06% in the reported month, aided by lower vegetable prices.
With the exceptionally low base related to the crash in fuel prices in January-March 2020 quarter, juxtaposed with the hardening of crude oil as well as other commodity prices in the ongoing month, the headline WPI inflation is set to record large upticks over the course of the next few months, Nayar said. “We now expect the WPI inflation to average 5-5.5% in FY22.”
Inflation Internals In January 2021:
- Manufactured products inflation stood at 5.13% compared with 4.24% in December.
- Primary articles inflation stood at 2.24% against 1.61% in December.
- Prices of food articles contracted 2.8% against a drop of 1.11% in the preceding month.
- Prices of non-food articles rose 4.16% against an increase of 3.13% in December.
- Fuel and power index contracted 4.78% against a fall of 8.72% in December.
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