WPI inflation in Feb eases backed by lowering food prices

After a fall in retail price inflation, the wholesale inflation too eased to 2.48% in February, backed by lower food prices.

Food prices declined sharply, 0.88% in February, against 3% in January. The fall was largely due to a decline in vegetables inflation, which came down 15.26%, from 40.77% in January. Manufactured products inflation increased in February, mainly led by inflation of chemicals and chemical products, cement, line and plaster, basic metal and mild steel.

The rate of increase in pulses was negative, so was in cereals and wheat. There was no price rise in egg, fish and meat, the government data showed.  

"Going forward, the cyclical factors will provide comfort of low wholesale inflation till May 2018, however, after that due to favourable base effect waning and summer months starting will push food and headline inflation higher," Devendra Kumar Pant, Chief Economist and Senior Director (Public Finance), India Ratings & Research said .

He said the worrying trend has been increasing divergence between consumer food price inflation as measured by CPI, and wholesale food articles inflation as measured by WPI. The divergence increased to 238 basis points in February 2018, from 23 basis points in December 2017. In fact, the divergence is highest in the last 27 months.

"While decline in retail food inflation is good news for the government and consumers, increasing divergence and sharp fall in wholesale inflation is synonymous with the plight of farmers," he said.