January WPI inflation eases to eight-month low: what experts say

India's wholesale prices-based inflation (WPI) eased to an eight-month low of 5.05 per cent in January, helped by moderating food prices, government data showed on Friday.

The wholesale price index's annual rise compared with a 5.80 per cent jump forecast by economists in a Reuters poll. In December, wholesale prices, long seen as India's main inflation measure, rose 6.16 per cent. (Read more)

COMMENTARY

A Prasanna, economist, ICICI Securities Primary Dealership, Mumbai:

"Core WPI creeping up and now touching 3 percent despite weak demand condition implies that there is not much slack left in the economy. The manufacturing and core WPI behaviour supports the message from CPI data that underlying price pressures in the economy are still strong relative to weak demand conditions. We don't expect a rate hike in April policy but further hikes cannot be ruled out given the strong price pressures."

Siddhartha Sanyal, India economist, Barclays, Mumbai:

"The headline number both in case of WPI and CPI show a big fall driven by food prices. But the euphoria over the moderation in the headline number needs to be balanced by the core inflation number which has inched up. At the moment, (RBI) governor Rajan has given enough indication of staying on hold. I don't expect Rajan to raise rates in April as inflation is easing and core inflation is not very high."

Sujan Hajra, chief economist, Anand Rathi:

"We expect the core WPI to inch up on increased wage cost and higher primary article prices even as the headline and the non-core will inch lower. We maintain our call for WPI to move to 3-4 per cent while CPI will move to 6-7 per cent over the next 9-12 months. However, we do not expect the RBI to cut rates."

Rupa Rege Nitsure, chief economist, Bank of Baroda, Mumbai:

"As expected, WPI based inflation has eased on the back of easing of food articles inflation, but the manufactured product prices inflation still reflects that some pricing power is left with manufacturing companies because of rupee depreciation and rise in input prices. It's too early to draw comfort from this number."

"The RBI will adopt a wait-and-watch approach as of now because going by just one set of data is not enough and the next set of data on inflation and industrial production will be critical to establish a trend."

Anubhuti Sahay, economist, Standard Chartered Bank, Mumbai:

"With both headline CPI and WPI printing much better than expected, we maintain our view of a status quo on repo rate in the April policy meeting. However, the uptick in core WPI to 3 per cent - the first time after April 2013 - keeps us wary.

Most of the positive surprise in today's inflation print is on the back of lower vegetable prices (22 per cent month-on-month correction). Thus a reversal in these prices especially during summer months can push headline inflation higher."

Shakti Satapathy, fixed income strategist, AK Capital, Mumbai:

"As evident, the easing of inflation resulted from a considerable fall in key vegetable prices and tamed oil inflation in the near term. Looking at the core WPI in a marginal rising zone and considering the stickiness in the retail core CPI, the current rate cycle of the RBI would remain at an elevated pace with probability of a no rate hike in the coming policy meet."

"However, the central bank would take note of the core inflation trend for reining the overall inflation level to its medium term target."

Copyright @ Thomson Reuters 2014