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Below the Perspective  on WPI data by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings

‘’’The WPI inflation eased marginally to 2.3% in January from 2.4% in December. The moderation in the WPI inflation was primarily on the account of a decline in food prices. The arrival of fresh harvests has led to a seasonal correction in food prices. The outlook for agriculture remains positive, with robust Kharif output and good progress of rabi sowing. Healthy reservoir levels will also provide the essential cushion for Kharif sowing in FY26, if the monsoon lags. We expect food prices will continue to ease in the coming months driven by seasonal correction in prices. Meanwhile, inflation in manufactured goods remained subdued in November, rising to 2.5% due to an unfavourable base effect from the previous year. Deflation in the fuel and power sector persisted, continuing the trend observed over the past five months.

On the external front, while Brent crude oil prices remain subdued, but inflation in industrial metals entered positive territory in January, exiting six months of deflation. Strong price momentum in certain base metals have contributed to the growth of industrial metal prices. Going ahead, it is crucial to monitor geopolitical developments and global trade uncertainties closely, as these could significantly influence global commodity markets and supply chains. The rupee has depreciated by ~4% in H2 FY25 so far against USD raising the risk of imported inflation. Despite the rise in global commodity prices in January, these factors are unlikely to pose a significant threat, as economic growth in China remains subdued. We expect the WPI inflation to remain largely benign over the next couple of months averaging 2.3% in Q4 FY25. For FY26, the WPI inflation is projected to average around 3%.’’

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