India’s annual rate of inflation based on wholesale prices sequentially rose to 2.03 per cent in January from a rise of 1.22 per cent in December.
In contrast, the January inflation rate last month was lower on a year-on-year basis.
“The rate of inflation, based on monthly WPI, stood at 2.03 per cent (provisional) for the month of January 2021 (over January 2020) as compared to 3.52 per cent during the corresponding month of the previous year,” a Ministry of Commerce and Industry statement on WPI said.
On a sub-segment basis, prices of primary articles, which constitute 22.62 per cent of the WPI’s total weightage, deflated further to (-) 2.24 per cent from (-) 1.61 per cent in December.
It increased at a faster pace in January 2020 at 10.01 per cent.
However, the WPI food index declined to (-) 0.26 per cent from 0.92 per cent reported for December 2020.
The prices of manufactured items remained at elevated levels with a rise of 5.13 per cent from 4.24 per cent reported for December and per cent recorded during January 2020.
Similarly, the prices of fuel and power with a weightage of 13.15 per cent rose (-) 4.78 per cent from (-) 8.72 per cent in December 2020.
“The index for this major group increased by (5.84 per cent) to 99.7 (provisional) in January, 2021 from 94.2 (provisional) for the month of December, 2020,” the statement said.
“Prices of electricity (11.49 per cent) and mineral oils (5.55 per cent) increased in January, 2021 as compared to December, 2020. Prices of coal remain unchanged.”
In sub-segment basis, potato prices decreased by (-) 22.04 per cent in January against 37.75 per cent during December.
Overall, vegetable prices in January fell (-) 20.82 per cent against (-) 13.2 per cent in December.
The prices of pulses became dearer by 7.92 per cent last month. The prices had risen by 9.69 per cent in December.
“Contrary to the market’s expectations of a soft print, as well as the dip displayed by the CPI, the WPI inflation jumped to 2 per cent in January 2021 from 1.2 per cent in December 2020,” said Aditi Nayar, Principal Economist, ICRA.
“The sharp rise in the WPI inflation in January 2021 was led by manufactured non-food products (core items), fuel and power, and crude petroleum and natural gas, even as the primary food inflation eased.”
According to Nayar, rising demand and strengthening pricing power will push core inflation higher to as much as 7-7.5 per cent during Q1 FY2022.
“We expect the CPI inflation to have bottomed out in January 2021, with large upticks expected in the next two prints,” she said.
“This, combined with the anticipated hardening in the core-WPI inflation, reaffirms our view that there is no room for further rate cuts in this cycle.”