Wholesale Inflation Eases in January as Food Prices Decline

Wholesale price inflation in India showed a slight decline in January, as food prices softened, according to official data released on Friday. The Wholesale Price Index (WPI) inflation improved to 2.31% in January 2025, down from 2.37% recorded in December 2024.

The data revealed that inflation in meat and fish dropped to 3.56% in January, compared to 5.43% the previous month. Similarly, inflation in the fuel and power category also showed a deflationary trend, decreasing to 2.78% in January from 3.79% in December 2024.

In the manufacturing sector, inflation eased to 2.51%, down from 2.14% sequentially. Meanwhile, the Consumer Price Index (CPI)-based inflation also moderated, reaching a 5-month low of 4.31% in January, mainly driven by a dip in food prices.

Inflation Eases in Food and Vegetables

Inflation in food items relaxed to 5.88% in January, compared to a higher 8.47% in December 2024. A major factor in this was the sharp drop in vegetable prices. Inflation in vegetables improved significantly to 8.35% in January, down from a steep 28.65% in the preceding month.

Tomato prices saw a notable drop, falling by 18.9%, while inflation in potatoes remained high at 74.28%. Onions, however, saw an increase in inflation, which surged to 28.33% in January.

Outlook for WPI and Food Prices

Rahul Agrawal, Senior Economist at ICRA, projected that the WPI would average 2.4% for the fiscal year 2024-25 (FY25). “We expect the WPI to average at 2.4% in FY2025 and inch up further to 3% in FY2026, despite the expected cooling in food inflation,” he noted.

Challenges Ahead for Inflation

Rajani Sinha, Chief Economist at CARE Ratings, explained that food prices are expected to ease in the coming months due to seasonal corrections. However, she highlighted several challenges to inflation in the future. One of the main concerns is the uncertainty around global commodity prices, particularly in the context of the new US government under President Donald Trump and its protectionist trade policies.

Sinha pointed out that these policies could lead to an increase in commodity prices, putting upward pressure on the non-food component of the WPI. Additionally, the depreciation of the Indian rupee could make imports more expensive, raising the risk of imported inflation. Geopolitical developments and global trade uncertainties will need to be monitored closely, as they could significantly impact global commodity markets and supply chains in the coming months.