WPI dips below 7% in January

India’s wholesale inflation dipped below the psychological 7 per cent in January, providing a much-needed respite to the government facing political ire for failing to control prices for the past three years.

The wholesale-price index came down 6.62 per cent in January from a year earlier, after climbing 7.18 per cent in December. This is the lowest inflation print in the past 38 months and the fourth consecutive monthly decline.

Although the moderation in inflation print came as a succour to the government after a set of disappointing data appeared to raise doubts on any turnaround in the economy as claimed by Finance Minister P Chidambaram, economists saw little reason for cheer given the high levels of retail inflation and widening current account deficit.

 A substantial decline in manufacturing product inflation and fuel and power segments helped the headline inflation slow to a level seen last in November 2009.

While the manufacturing product inflation came down 4.8 per cent, the fuel group inflation was 7.06 per cent compared to over 9 per cent in the previous month. Prime Minister’s Economic Advisory Council Chairman C Rangarajan expressed hope that WPI could fall to 6.5 per cent by March. He was non-committal on whether this data would influence the Reserve Bank of India to cut policy rates further.

Economists, however said the RBI was unlikely to cut policy rates because of the high level of current account deficit. Thursday’s data showed that the food inflation remained elevated at 11.88 per cent in January from 11.16 per cent in the previous month.

Food articles category has over  14 per cent share in the WPI basket.