Onion prices fall 300% in 4 months, wholesale inflation eases

Onion prices cooling off as much as 300 per cent in January helped India's wholesale price-based inflation ease to an eight-month low, government data showed on Friday. Onion inflation has fallen to a little over 6 per cent in January after touching 336 per cent in September last year and is at a near one-and-a-half year low.

The wholesale price index (WPI), long regarded as India's main inflation measure, rose 5.05 per cent last month, compared to a rise of 6.16 per cent in December. A Reuters poll of economists had expected inflation to jump 5.80 per cent in January.

Potato inflation also eased to 22 per cent from 55 per cent in December.

However, core WPI inflation inched up to 3 per cent last month, which analysts said was its highest level since April 2013, which is likely to have Reserve bank of India (RBI) Governor Raghuram Rajan worried.

"...the euphoria over the moderation in the headline number needs to be balanced by the core inflation number which has inched up," said Siddhartha Sanyal, India economist at Barclays.

Persistently high inflation prompted Dr Rajan to raise interest rates last month, the third hike since September, even though economic growth has been stuck below 5 per cent for the past four quarters.

Friday's data comes days after easing food prices helped retail inflation ease to a two-year low of 8.79 per cent in January.

(With inputs from Reuters)