WPI inflation cools to 25-month low of 3.85% in Feb

The Wholesale Price Index (WPI)-based inflation declined to a 25-month low of 3.85 per cent in February 2023 on easing prices of manufactured items and fuel and power, government data showed on Tuesday. This is the ninth straight month of decline in WPI-based inflation.

It was 4.73 per cent in January, 4.95 per cent in December 2022, 5.85 per cent in November last year, and 13.43 per cent in February 2022.

The food index inflation eased to 2.76 per cent in February from 2.95 per cent in January.

"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 in a statement.

Inflation in food articles, however, rose to 3.81 per cent in February, as against 2.38 per cent in January.

Inflation in pulses came in at 2.59 per cent, while in vegetables was (-) 21.53 per cent. Inflation in oil seeds was (-) 7.38 per cent, while in fruits was 7.02 per cent last month.

Fuel and power basket inflation eased to 14.82 per cent, from 15.15 per cent in January 2023. In Manufactured products, it was 1.94 per cent in February 2023 as compared to 2.99 per cent in January.

"Overall, easing in WPI might help corporate earning margins but from a policy perspective, CPI being the key index, the latest reading will keep policymakers on their toes with possibility of another rate hike in April. Further, the risk of global central bank’s policy remains amidst elevated inflation along with a fresh challenge on maintaining bank stability on the back of SVB fallout. The US Fed's March policy meeting will provide some clues to markets on their perspective in managing this crisis and can become important before the RBI's meeting as well," said Vivek Goel, Co-founder and Joint Managing Director at Tailwind.

The deceleration in WPI comes in line with the dip in retail inflation, data of which was released on Monday. CPI-based retail inflation declined to 6.44 per cent in February from 6.52 per cent in January.

In its monetary policy review last month, the Reserve Bank of India (RBI) had hiked key interest rate by 25 basis points to 6.50 per cent, saying core inflation still remains sticky.