NEW DELHI: India’s wholesale price index (WPI)-based inflation rose marginally to 2.38 per cent in February on higher global commodity prices and is expected to increase further in March on higher metal prices, stated a report by Barclays. “While inflation in manufactured products rose and deflation in fuel & power narrowed, lower food inflation in part offset that, bringing the headline below our estimate. We see modest increase in March, on higher metals prices,” said Aastha Gudwani, India Chief Economist, Barclays. In January, WPI inflation stood at 2.31 per cent. Sequentially, WPI rose 0.1 per cent MoM nsa versus a decline of -0.6 per cent in December, and similar to the ~0.1 per cent the median MoM increase typical of February. For FY24-25 so far (April February), WPI inflation stands at a modest 2.25 per cent YoY compared with a decline of 0.8 per cent YoY seen during the year-earlier period.
Expectedly, Barclays said, the correction is now tapering. “In YoY terms, this translates to a material disinflation in primary food WPI to 3.4 per cent YoY from 5.9 per cent in January. The sequential decline in food prices was driven yet again by vegetables -15.6 per cent MoM), pulses (-3.9 per cent) and spices (-8.4 per cent). We note that the magnitude of decline in prices of pulses and spices was sharper than seen in January (-3.1 per cent each). Cereals WPI continued to rise MoM, despite the fall in prices of pulses, due to moderate rise in prices of wheat and paddy.
Meanwhile, non-food primary inflation rose noticeably to 4.8 per cent YoY in February vs 2.95 per cent in January. However, Barclays said, this was entirely due to a base effect, which added 220bp to the sub-index inflation; sequentially, prices were down -0.4 per cent MoM nsa.
Further, the deflation in crude petroleum and natural gas WPI deepened in February. The fuel and power WPI continued to deflate, though the pace narrowed in February. This, Barclays report stated, was due to sequential rise in prices of mineral oils for the second consecutive month, particularly wholesale prices of petrol, kerosene, diesel and ATF.
Prices of manufactured products rose by 2.9 per cent YoY in February from 2.5 per cent in January. “Overall, out of the 22 groups for manufactured products, 17 groups witnessed an increase in prices, 2 groups witnessed a decrease in prices and 3 groups witnessed no change in prices sequentially. Excluding food, core manufactured WPI inflation rose to 1.3 per cent YoY from 1.0 per cent in January. We think core WPI inflation may rise gradually over the coming months, reflecting the rise in international metal prices in February,” Aastha Gudwani said.
Furthermore, CareEdge Ratings projected Q4FY25 WPI inflation averaging at 2.3 per cent and 3 per cent for FY26. Rajani Sinha, Chief Economist, CareEdge Ratings, said, “Going ahead, it is crucial to monitor geopolitical developments and global trade uncertainties closely, as these could significantly influence global commodity markets and supply chains. Recent depreciation of rupee against USD raises the risk of imported inflation. Despite the rise in global commodity prices, these factors are unlikely to pose a significant threat, as economic growth in China remains subdued. We expect the WPI inflation to remain largely benign over the next couple of months averaging 2.3 per cent in Q4FY25. For FY26, the WPI inflation is projected to average around 3 per cent.”
Sonal Badhan, Economist, Bank of Baroda, said, “Going forward, as trade war deepens further and uncertainty around Fed rate cut looms, volatility in market is expected to remain. Commodity prices are seeing some build up in pressure as demand rose ahead of tariff implementation dates.”
Source: The Financial Express
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