Wholesale price-based inflation (WPI) for January 2021 is 2.03%, higher than the 1.22% recorded in December 2020. This hike was against the market’s expectations of a soft print and notwithstanding a dip displayed by the Consumer Price Index (CPI). According to the official data from the Office of the Economic Advisor, Department for Promotion of Industry and Internal Trade (DPIIT), The latest wholesale price index (WPI) print is, much lower than the 3.52% recorded in January last year showed. Also, the November 2020 WPI inflation has now been revised at 2.29%.

The sharp rise in the WPI in January was led by core items in manufactured non-food products, fuel & power, crude oil & natural gas, even after the easing of primary food inflation. Core hit a 27-month high of 5.1% in January 2021. Manufactured products inflation, which has 64% weight in the index increased from a level of 4.24% to 5.13%. The primary articles index contracted by 2.24% and fuel and power contracted at 4.78%. The food index, comprising ‘food articles’ and ‘food product’ from both of the primary articles group and manufactured products group contracted by  0.26% against inflation of 0.92% in the previous month.

ICRA is of the view that rising demand and strengthening pricing power will make core inflation rise further to as much as 7.0-7.5% during Q1 FY2022. Aditi Nayar, Vice President, ICRA Limited, spoke about expecting the WPI to average 5-5.5% in FY2022 unless the available vaccines turn out to be ineffective against new Covid-19 variants, letting commodity prices, consumer confidence, and business sentiment fall. According to her, with the exceptionally low base related to the crash in fuel prices in Q4 FY2020, juxtaposed with the hardening of crude oil as well as other commodity prices in the ongoing month, the headline WPI inflation is set to record large upticks over the course of the next few months.