Wholesale inflation at 2%

Inflation, measured by the wholesale price index, rose to 2% in January from the previous month’s 1.2% on the back of rising manufactured product prices. Economists said they do not see any interest rate cuts from the Reserve Bank of India for now, despite retail inflation showing signs of cooling.

Data released earlier had shown retail inflation cooling to a 16-month low of 4.1% in January as some food and vegetable prices eased. Retail and the WPI inflation have shown signs of diverging.

The WPI numbers released by the commerce and industry ministry on Monday showed prices in the manufactured products category rose to an eight month high, which economists said was an encouraging sign as it displayed the return of pricing power for companies.

The food segment displayed sharp deflation and inflation in food articles contracted to a 26-month low of 2.8% in January. Prices of vegetables fell 20.8% for the second consecutive month. Inflation in onions fell for the third month by 32.6%.

Inflation in primary articles, which accounts for 22.62% of WPI, registered the sharpest decline in 43 months, according to a note by Care Ratings.

Wholesale prices is likely to register an up-tick in the coming months, with sustained surge in manufacturing. Core inflation (minus food and fuel) rose to a 27-month high of 5.1% in January and experts said the strengthening of pricing power could push it to 7-7.5% range in the first quarter of fiscal year 2022.

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