IANS | 15 May, 2024
The Wholesale Price Index (WPI) is expected to be in the region of
2-3 per cent over the next two quarters and average at around 3 per cent
for FY25, top economists at two credit rating agencies said as the
Commerce and Industry Ministry announced the WPI for April 2024 was 1.26
per cent.
Reacting to the numbers, Suman Chowdhury, Chief
Economist and Head, Research, Acuite Ratings & Research said: "WPI
trajectory in India is finally showing signs of a pickup, rising to 1.26
per cent YoY (year-on-year) in April '24 from 0.53 per cent YoY in
March '24."
He said this is the highest WPI print in the last 13
months and has been driven by a reversal from deflation to inflation at
1.4 per cent YoY in fuel and power inflation; a rise in global crude
prices and its derivatives along with rising higher power tariffs are
the factors behind the rise in this category.
"Expectedly, the
wholesale food group inflation has also seen a rise to 5.5 per cent YoY,
reflecting higher vegetable and fruit prices," he said.
The
wholesale inflation for manufactured goods has persisted in the
contractionary zone at minus 0.4 per cent YoY, though the extent of
deflation has reduced.
Since March '23, i.e. for the last 14
months, manufacturing inflation has remained in a deflation mode,
implying benign input costs for the industrial segment in the absence of
a strong global demand.
However, a stronger domestic economy and demand may soon lead to a firm-up in manufacturing inflation, Chowdhury opined.
According
to him, with a rising outlook for fuel and power as well as
manufacturing inflation in the near term, WPI inflation is set to test
higher levels in the current year.
Overall, the WPI inflation
print will also be shaped by the trend in the food category and is
expected to remain between 2.0 per cent-3.0 per cent over the next two
quarters, unless there are major surprises on commodity prices, he said.
"This
will also make it difficult for headline CPI inflation to moderate
towards 4.5 per cent in FY25, thereby making it also difficult for RBI
to take a call on rate cut in the first half of the year," Chowdhury
said.
According to Rajani Sinha, Chief Economist, CARE Ratings,
the wholesale inflation of fuel and power entered positive territory
after 11 months in April.
Brent crude oil prices had touched
$90/bbl in April due to supply chain disruptions in the Middle East amid
geopolitical conflicts.
While Brent crude prices have moderated
in the past couple of weeks, the recent uptick in global commodity
prices, especially industrial metal prices, warrants close monitoring as
it can result in higher input costs. Industrial metal prices have risen
by about 20 per cent in the past three months, Sinha said.
"Going
ahead, the base effect will remain adverse over the next two months,
thereby resulting in higher WPI inflation. External risks emerging from
ongoing geopolitical tensions also need to be monitored, given the risk
they can pose to supply chains," she said.
According to Sinha, the
outlook for food inflation has brightened due to anticipations of a
normal monsoon, which is expected to bolster agricultural production.
However, monitoring the monsoon's temporal and spatial distribution is
critical.
"We expect WPI inflation to average around 3 per cent in FY25," she said.