India’s wholesale price index (WPI) inflation exhibited a notable easing, decreasing to 0.27% in January 2024 from 0.73% in December 2023, as per data released by the Commerce and Industry Ministry. This decline was driven by a reduction in prices of manufactured goods, fuel, and power, dampening the inflation rate.

However, despite the overall decrease, food prices experienced an increase in January, sustaining the wholesale price index in positive territory. The index for the manufacturing group also dropped by -0.21% to 139.8 in January 2024 from 140.1 in December 2023, indicating a moderation in manufacturing costs.

Suman Chowdhury, Chief Economist and Head of Research at Acuité Ratings & Research, commented on the WPI January data, noting that the trajectory was slightly more benign than anticipated, with the index slipping to 0.27% year-on-year from 0.73% year-on-year. Chowdhury highlighted the continued deflationary trend in wholesale food prices, contributing to a -0.33% sequential contraction in the index during January.

Chowdhury emphasised that the deflation in manufactured goods persisted at -1.1% year-on-year and -0.2% month-on-month, marking the eleventh consecutive month of manufacturing inflation remaining in deflation mode.

“This indicates that input costs remain favourable for the industrial segment in the absence of a strong global demand. The fuel and power category has, however, seen some mild pressures at 0.4% MoM due to higher commercial LPG prices although the annualised figure is still in deflation at -0.5%,” he said.

Looking ahead, Chowdhury predicted that the deflationary trend in manufactured goods is likely to persist in the near term. He expects the overall WPI inflation print to be shaped by the trend in the food category and, barring major surprises, foresees it remaining within the 0%-1.0% range over the next two quarters. This forecast underscores the nuanced economic landscape and the cautious outlook for pricing dynamics in key sectors.