India’s wholesale price index-based inflation eased further to 0.27 per cent in January on an annual basis, as against 0.73 per cent in December, stated provisional data from the Commerce Ministry on Wednesday. A Reuters poll had estimated the index would rise 0.53 per cent.
The month-on-month change in WPI index for January witnessed a contraction of (-)0.33 per cent from a contraction of (-)1.12 per cent in the preceding month.
“Positive rate of inflation in January, 2024 is primarily due to increase in prices of food articles, machinery & equipment, other manufacturing, minerals, other transport equipment etc,” the release said.
Inflation for food articles stood at 6.85 per cent in January. For the primary articles segment, the inflation rate in January declined by 1.04 per cent to 3.84 per cent.
Wholesale inflation in crude petroleum and natural gas eased 0.20 per cent. The fuel and power inflation contracted to (-)0.51 per cent in January.
Inflation for manufactured products came in at -1.13 per cent in January.
Earlier this week, India’s retail inflation data was released which showed that it has eased to 5.10 per cent on an annual basis as against a four-month high of 5.69 per cent in December, data released by the Ministry of Statistics & Programme Implementation showed. A Reuters poll of 44 economists had forecast a three-month low of 5.09 per cent.
RBI’s inflation forecast
The Reserve Bank of India (RBI), which held its repo rate at 6.50 per cent for a sixth consecutive meeting on February 8, highlighted “large and repetitive food price shocks” as one of the biggest risks to the ongoing disinflation trend.
In it’s February meeting, the RBI Monetary Policy Committee (MPC) left its inflation forecast for FY24 unchanged at 5.4 per cent, despite food price rise concerns, uncertainty around crude costs even amidst a recent slump and chances of domestic growth momentum creating demand pressure on inflation.
The central bank had also stated that it expects inflation to be 5 per cent in the current quarter ending March 31.
“Food price inflation continued to impart considerable volatility to the inflation trajectory,” RBI Governor Shaktikanta Das had said while announcing the policy decisions. “In contrast, the deflation in CPI fuel deepened and core inflation (CPI inflation excluding food and fuel) moderated to a four-year low of 3.8 per cent in December.”
Geopolitical events and their influence on supply chains, along with the volatility in international financial markets and commodity prices, are ‘key sources’ of upward risks to inflation, the RBI had said. The collective impact of policy repo rate increases is still making its way through the economy, it added.
For Q1FY25, Q2FY25, Q3FY25 and Q4FY25, the inflation reading was pegged at 5 per cent, 4 per cent, 4.6 per cent and 4.7 per cent respectively, assuming a normal monsoon next year, by the RBI.
RBI’s Das has often repeated that the RBI is determined to bring down inflation to 4 per cent. Recently, he expanded the scope of his frequently cited ‘Arjuna’ analogy to convey that it takes into account various factors beyond just inflation when shaping policies, while flagging that headline inflation remains vulnerable to recurring and overlapping shocks due to overseas and domestic factors.
India’s policymakers have been working to keep inflation in check through a mixture of monetary and fiscal interventions, be it through rates or export curbs.
Informing the Parliament of the measures taken to keep inflation stable, Finance Minister Nirmala Sitharaman, while presenting Interim Budget 2024-25 in the Lok Sabha said “retail inflation is stable and has come down within the tolerance band as a result of the steps taken by the government to check price rise, especially in perishable commodities.”
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