Wholesale price index slips into negative zone

Riding high on the fall in fuel prices, the wholesale price index (WPI) dipped to – 0.39 per cent in January. A fall in inflation has been recorded for the eighth consecutive month. Inflation was at 0.1 per cent in December.

The WPI plunged into the negative zone as the slide in fuel prices more than offset the increase in food prices, which continued to be high.

Negative WPI inflation reflects falling cost of production in the economy. It could eventually be reflected in consumer prices. Consumer price inflation hit 5.11 per cent in January, according to official data released last week.

It captures inflation closest to producers and has a broader coverage of manufactured products. It does not capture price inflation in services.

With a sharp pick-up in pulses, grains and vegetables, food inflation surged to 8 per cent in January as against 5.2 per cent in December, according to official data released on Monday. Fruits and milk continue to show high increase while prices of pulses rose 12.3 per cent.

In the coming months, food prices can be expected to rise further if the rabi harvest shrinks in line with the Agriculture Ministry’s forecast, indicated HSBC chief economist Pranjul Bhandari in a report.

Low global commodity prices, however, are likely to keep the WPI inflation largely under control, she said. Pulses, coarse cereals and oilseeds could witness some pressure points.

Fuel inflation slumped to minus 10.7 per cent as against minus 7.8 per cent in December.

The disinflation in manufactured components was strongest in tobacco, textiles, leather, chemicals and metal products.