India’s wholesale price index-based inflation eased to 2.31% in January from 2.37% in December due to a decline in food prices, especially vegetables, according to the provisional data released by the commerce and industry ministry on Friday.
The fall in WPI-based inflation in January did not surprise experts, as a drop in food prices was expected with the arrival of fresh harvests. A Reuters poll of economists had expected wholesale inflation to rise by around 2.5% in January.
Food prices decline
Food prices, a major contributor to the index, increased by 7.47% in January, easing from 8.89% in December. Vegetable prices rose 8.35% year-on-year, but down from the 28.65% surge in the previous month.
Cereal prices rose 7.33% in January, up from 6.82% in December. The price of pulses rose slightly to 5.08% in January from 5.02% in December.
Food prices have remained elevated for over a year, primarily during November 2023-June 2024 due to uneven and below-normal monsoon rains.
“Correction in food inflation helped in the wholesale inflation edging down to 2.3% in January… This was also helped by a sustained decline in prices of fuel & power (2.8% yoy, now for six straight months),” said Paras Jasrai, senior economic analyst at India Ratings and Research.
“However, the trend was not broad-based as inflation in core, non-food articles (others) and energy & minerals recorded an increase in January 2025. The non-food articles firmed up further to a two-year high of 3.0% in January 2025, while the prices for energy & minerals were up 0.6% YoY after a gap of four months,” he added.
Beyond food prices
Manufactured product prices, which make up around 64% of the wholesale price index, rose 2.51% in January, up from 2.14% in December.
Fuel and power prices fell 2.78% year-on-year against a 3.79% decline in the previous month.
“Inflation in manufactured goods remained subdued in November, rising to 2.5% due to an unfavourable base effect from the previous year. Deflation in the fuel and power sector persisted, continuing the trend observed over the past five months,” said Rajani Sinha, chief economist, CareEdge.
“On the external front, while Brent crude oil prices remain subdued, but inflation in industrial metals entered positive territory in January, exiting six months of deflation. Strong price momentum in certain base metals have contributed to the growth of industrial metal prices,” she added.
Prices of non-food articles rose 2.95% year-on-year in January, from 2.46% year-on-year in December.
Prices of primary articles—which include food articles, non-food articles, minerals, and crude petroleum and natural gas— rose 4.69% in January, after rising 6.02% year-on-year in December.
Taming inflation
Retail inflation, based on the Consumer Price Index (CPI), was at 4.31% in January, down from a 5.22% rise in December and below the 5.48% in November and 5.10% a year ago, according to official data released earlier this week.
Last week, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) reset its repo rate to 6.25%, the first such easing move since the 2020 covid outbreak.
Regulating interest rates is a key for the central bank to control inflation.
A higher interest rate regime makes borrowing costs more expensive, reducing demand among banks, financial institutions, and the general public, which can, in turn, bring down consumer spending and inflation.
RBI’s medium-term target for CPI inflation is 4% within a band of plus or minus 2%.
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