January WPI inflation eases to 24-month low of 4.73%

BREATHER AFTER NEWS OF SPURT IN RETAIL INFLATION

- SURABHI

• Expectations of cooling in retail inflation get boost

WHOLESALE PRICE INFLATION hit a 24-month low of 4.73% in January this year, aided by a favourable base effect and moderation in prices of manufactured products and fuel and power although a number of food items became more expensive. However, with wholesale inflation easing for the eighth consecutive month, the expectation of a similar cooling in retail inflation has also been bolstered, despite an uptick in January.

Retail inflation rose to a three-month high of 6.52% last month increasing the chances of the Reserve Bank of India going for a further hike in repo rate in its next policy in April. The repo rate is now 6.5%, thanks to sixth rounds of rate increases by the MPC-RBI which is keen to bring inflation under control and align it with the medium-term target of 4+/-2%.

With wholesale price index registering further moderation, it is expected that retail inflation too would ease, though with a lag. The data also suggests that the passthrough of higher input costs to finished product prices is either almost over or nearing completion.

The RBI projected retail inflation to moderate to 5.3% for FY24.

WPI inflation was at 4.95% in December 2022 and was at 13.68% in January 2022. It had hit a peak of 16.63% in May last year. Analysts expect it to further ease to less than 4% in February due to a favourable base effect as well as lowering commodity prices in global markets.