Inflation based on the Wholesale Price Index (WPI) moderated to a two-year low of 3.85% in February from 4.73% in January, with manufactured products’ inflation cooling from 3% in January to a little under 2%, and primary articles, food and fuel and power recording milder downturns in the pace of inflation from a month earlier. Base effects also played a role as February 2022 had clocked a 13.43% uptick in wholesale prices.
The wholesale inflation rate for December 2022 was revised upwards from 4.95% to 5.02%. Fuel and Power inflation eased slightly from 15.15% in January to a 14.8% price rise this February, compared to 30.8% in the same month of 2022. Inflation measured by the Wholesale Food Index dropped from 2.95% in January to 2.76% in February, the pace of decline slightly higher than witnessed in consumer food prices, which moved from 6% to 5.95% over the same period.
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“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 Commerce and Industry Ministry said.
Onion prices continued to fall year-on-year for the 18th straight month since September 2021, with February 2023 recording the sharpest drop of 40.14% in wholesale prices amid this deflationary streak.
Vegetables inflation contracted for the fourth successive month with prices falling 21.5% from February 2022 levels. Potato prices which had been rising sharply since February 2022, with 11 successive months of double-digit inflation, slipped 14.3% in February 2023.
While retail cereals inflation has accelerated close to 17% in February, wholesale inflation in the critical food item eased to a three-month low of 13.95%. Wheat inflation also dropped to a three-month low of 18.54 but paddy inflation sped to 8.6%, the highest in at least two years.
Wholesale inflation in fruits (7%), and milk (10.33%) also marked fresh highs in recent times and were higher than consumer level experience of price rise in February, indicating there may be room for more retail price hikes in coming months.
Within the fuel and power segment, LPG prices fell for the fourth straight month, but marked the slowest pace of deflation in those four months at -7.1%. Inflation in petrol prices fell marginally from 15.5% in January to 15.2% in February, while high speed diesel inflation eased from 28.5% in the previous month to 24.6% in February.
Textiles products recorded a third consecutive month of falling prices, with deflation quickening to 3.5% from 2.1% in January. However, wholesale inflation in wearing apparel inched up to a three-month high of 3.5%.
“Amidst a mixed trend in the wholesale prices of essential commodities in the early part of the month, the wholesale price inflation is anticipated to soften to ~2% in March,” rating firm ICRA said in a note, adding it expects wholesale prices to slip into deflation mode during the first quarter of 2023-24 thanks to the high base from a year ago. “The outlook for food inflation over the next few quarters is clouded by emerging risks such as a potential heatwave and the development of El Nino conditions,” ICRA cautioned.
