Costly onion, potato push WPI inflation to 3.1% in Jan

Both food, non-food articles inflation are expected to rise further, say experts

Wholesale Price Index (WPI)-based inflation rose to 3.1 per cent in January, against 2.76 per cent in the same month last year. The latest WPI print is also higher than the 2.59 per cent reading recorded in December 2019.

Build-up inflation rate in the financial year so far is 2.50 per cent compared to a build-up rate of 2.49 per cent in the corresponding period of the previous year, official data showed on Friday.

A surge in onion and potato prices lifted food articles inflation to 11.51 per cent for the month against 2.41 per cent in same month last year. Food articles inflation in January was, however, lower than 13.2 per cent in December 2019.

Non-food articles saw a three-fold jump to 7.8 per cent in January from 2.32 per cent in the year ago period.

Among the food articles, vegetables prices surged 52.72 per cent mainly on account of spike in price of onion, which saw 293 per cent jump, followed by potato at 37.34 per cent.

It may be recalled that earlier this week retail inflation for January came in at six-year high of 7.59 per cent, much above the RBI comfort zone and primarily due to rising vegetable and food prices.

Manufactured products inflation for January came in at 0.34 per cent against 2.79 per cent in same month last year.

The disinflation in the core WPI narrowed to 1.0 per cent in January from 1.5 per cent in the previous month.

Experts’ take

Aditi Nayar, Principal Economist, ICRA Ltd, said even with further correction anticipated in vegetable prices in February , the primary food inflation may persist in double-digits in that month.

“Higher customs duties would push up inflation related to imports to some extent going forward. However, the impact of the spread of the coronavirus on risk sentiment and commodity prices, including crude oil, is expected to exert a substantial moderation on the wholesale inflation in February,” Nayar said.

Madan Sabnavis, Chief Economist, CARE Ratings, said: “WPI came at 3.1 per cent which was our forecast too. The positive increase in inflation for manufactured goods is a good sign for industry which has been confronted with negative inflation so far which means loss of pricing power. The moderation in primary inflation is not really very significant as both components — food and non-food are still high. Fuel inflation, however, should come down in the next two months.”