Wholesale price inflation eases to 2.31% in January helped by moderation in food prices

Wholesale price inflation moderated marginally to 2.31% in January due to the decline in prices of food items especially vegetables, government data released on Friday showed.

The Wholesale Price Index (WPI) based inflation was 2.37% in December 2024. It was 0.33% in January 2024.

As per the data, inflation in food items eased to 5.88% in January, as against 8.47% in December 2024. Inflation in vegetables came down significantly to 8.35%, as against 28.65% in December 2024.

In the eggs, meat and fish category inflation declined to 3.56% as against 5.43% last month.

Within vegetables, tomato prices declined to 18.9% while inflation in potato continued to be high at 74.28%, and in onion it spiked to 28.33% in January.

The fuel and power category witnessed a deflation of 2.78% in January, against a deflation of 3.79% in December. In manufactured items, inflation was 2.51% as compared to 2.14% in December 2024.

Retail inflation data released on Wednesday showed that Consumer Price Index (CPI) based inflation eased to a 5-month low of 4.31% in January on easing prices of food items.

ICRA Senior Economist Rahul Agrawal said, "We project the WPI to average at 2.4% in FY2025 and inch up further to 3% in FY2026, despite expectations of a cooling in the prints for the food segment".

According to CARE Ratings Chief Economist Rajani Sinha, food prices are likely to ease in the coming months driven by seasonal correction in prices.

However, there are headwinds as far as global commodity prices are concerned. Their prices have been hardening amid growing uncertainty around the impact of the US protectionist trade policies. This would exert an upward pressure on the WPI non-food component.

Going ahead, Sinha said it is crucial to monitor geopolitical developments and global trade uncertainties closely, as these could significantly influence global commodity markets and supply chains.

Besides, rupee depreciation would make imports costlier raising the risk of imported inflation.

The rupee has depreciated about 4% against the US dollar so far in the second half of the current financial year.

Earlier this month, RBI slashed the policy rate by 25 basis points to 6.25% in a bid to promote consumption. The rate cut happened after a gap of 5 years. RBI had last reduced the rate in May 2022.

The monetary policy action in April 2025 monetary policy is dependent on factors, including currency movement and liquidity in the system, Paras Jasrai, Senior Economic Analyst India Ratings and Research said.