Wholesale inflation cools to 3.85% in February

India's wholesale inflation based on the wholesale price index (WPI) eased to 3.85% year-on-year in February from 4.73% in January, according to provisional data shared by the commerce ministry on Tuesday.

This is the lowest wholesale inflation level since January 2021 when the WPI inflation was 2.51%.

Decline in the rate of inflation in February 2023 is primarily contributed by fall in prices of crude petroleum & natural gas, non-food articles, food products, minerals, computer, electronic & optical products, chemicals & chemical products, electrical equipment and motor vehicles, trailers & semi-trailers, the ministry said.

The rate of inflation based on WPI Food Index decreased from 2.95% in January, 2023 to 2.76% in February 2023, it added.

On Monday, India's retail inflation measured by the Consumer Price Index (CPI) eased marginally to 6.44% year-on-year in February as compared with 6.52% in January, staying above the Reserve Bank of India’s (RBI) upper threshold limit of 6%. While urban inflation rose to 6.1% in February from 6% in January, rural inflation declined to 6.72% in February from 6.85% in January, according to data released by the Ministry of Statistics & Programme Implementation.

Food inflation stood at 5.95% in February as against 5.94% in January. Inflation rate for vegetables contracted 11.6% in February against a contraction of 11.7% in the previous month. Inflation rate for cereals and products rose 16.73% while that for milk and products jumped 9.65%. Inflation rate for spices soared 20.20%. Fuel and light inflation rose 9.9% in February as compared with 10.84% in January. Inflation rate for the clothing and footwear segment rose 8.79% in February, down from 9.08% in January.

The Reserve Bank of India's Monetary Policy Committee last month hiked the key repo rate to 6.5% to control rising inflation.

Meanwhile, elevated temperatures across India could not only affect the country’s agricultural output but also keep inflation at elevated levels, according to India Ratings and Research (Ind-Ra). The ratings agency expects retail inflation to stay firm at around 6.5% due to sticky food & beverages and core inflation in February 2023. The agency believes that the retail inflation trajectory would be impacted by the likely decline in wheat production, an uptick in vegetable prices and stickiness in core inflation.

The forecast comes at a time when the India Meteorological Department (IMD) has warned of the plausibility of severe heat waves during March-May 2023. The March to May period is going to be hotter than usual, with enhanced probability of occurrence of heatwave over many regions of Central and adjoining Northwest India, IMD said in February.