The Wholesale Price Index (WPI) was recorded at 2.48 percent for the month of February on the back of moderating food prices. The wholesale inflation number for the month of November has been revised upwards to 4.02 percent from 3.93 percent. From the previous month’s number of 2.91 percent, WPI food inflation declined to 1.65 percent. Despite fall in food prices, WPI core inflation surged from 3.1 percent to 3.5 percent in month of December. The food index declined to 2.4 percent and vegetable index was down 16 percent. In the month of November, unseasonal rains damaged crop produce which led to higher inflation due to increase in vegetable and food prices. The crude oil price has also come down now and have settled under $65 a barrel level.
CARE Ratings believes that food prices will remain stable for the coming months. However, inflation may witness a uptick due to these 4 reasons:
1)Rise in global oil prices
2)Unseasonal weather patterns
3)Hike in Minimum Support Price (MSP) for select crops
4)Probability of increase in prices of commodity due to trade tariffs
The wholesale inflation is likely to remain around 2.5-3 percent for the remainder of FY18 and there will not be any interest rate action from the RBI in April 2018, CARE Ratings said.
Reserve Bank of India (RBI), in its last monetary policy review meeting, maintained the status quo expecting increase in inflation. It also raised it forecast for CPI between 5.1 percent and 5 percent in the first half of FY18.
The retail inflation moderated for the month of January to 5.1 percent from a high of 5.58 percent last month. But, it was still 100 basis points higher than the central bank’s target of 4 percent.