A sharp fall in food prices helped Wholesale price index (WPI) based inflation ease to 2.31 per cent in January 2025 from 2.37 per cent recorded in December 2024, official data showed.
The latest reading is however, much higher than the 0.33 per cent overall WPI level recorded in January 2024, according to data released by Commerce and Industry Ministry.
Food index inflation fell sharply to five month low of 7.47 per cent in January 2025 from 8.89 per cent in December 2024, largely due to vegetable inflation touching five month low of 8.4 per cent.
Within vegetables, a decline in tomato prices (18.9 per cent) helped in bringing relief despite heightened inflation levels for onion (28.3 per cent) at a three-month high) and potato (74. 3 per cent) in the same period, said Paras Jasrai, Senior analyst & Economist, India Ratings.
- Read also: WPI inflation falls to 3-month low of 1.89% in November on softer food Prices
“Overall, the expected correction in food inflation along with a benign core inflation would keep the wholesale inflation near to 2 per cent in February 2025”, Jasrai added.
While manufactured products inflation rose 2.5 per cent in January 2025 (2.1 per cent in December 2024), fuel & power saw disinflation of 2.8 per cent (3.8 per cent).
The decline in food prices offset unfavourable base effects as well as a sequential uptick in wholesale prices of fuel and manufactured products.
For the April-January 2025 period, WPI inflation came in at 2.22 per cent (-0.92 per cent).
The positive rate of inflation in January 2025 is primarily due to increase in prices of manufacture of food products, food articles, other manufacturing, non food articles and manufacture of textiles etc, according to the Commerce and Industry Ministry.
Meanwhile, the final WPI number for November 2024 has been pegged at 2.16 per cent.
Rahul Agrawal, Senior Economist, ICRA said that the January 2025 WPI reading of 2.3 per cent was in contrast with ICRA’s expectations (+3.1 per cent) of an uptick.
The surprise was largely driven by the lower-than-anticipated prints for the food and core items, Agrawal said.
He also said that ICRA expects the overall WPI-food inflation to ease further to sub 7 per cent in February 2025 from 7.5 per cent in December 2025.
ICRA expects the headline WPI inflation to inch up to 2.4-2.6 per cent in February 2025 from 2.3 per cent in January 2025, with cooling in the WPI-food inflation partly offsetting the adverse impact of the uptick in commodity prices and the depreciation in the USD/INR pair on the non-food segments.
“Overall, we project the WPI to average at ~2.4 per cent in FY2025 and inch up further to ~3.0 per cent in FY2026, despite expectations of a cooling in the prints for the food segment. A continued depreciation in the USD/INR pair and tariff-related rise in global commodity prices would pose upside risks to our estimates”, Agrawal said.
Aastha Gudwani, India Chief Economist, Barclays, said the deflation in crude petroleum and natural gas WPI persisted in January, albeit at a slower pace (-0.5 per cent y/y vs -6.8 per cent in December), driven by a surge in crude oil prices.
The fuel and power WPI remains in deflation, though here too the pace slowed to -2.8 per cent y/y in January vs -3.8 per cent in December. This was due to sequential rise in the prices of mineral oils, including wholesale prices of petrol, naptha, and bitumen, Gudwani noted.