India's wholesale inflation eases to 0.2% in February

New Delhi: Wholesale inflation in India, based on the Wholesale Price Index, remained in positive territory for the fourth month after remaining in the negative zone for the seventh straight month until October.

The annual rate of inflation based on all India Wholesale Price Index (WPI) numbers is 0.20 per cent (Provisional) for February 2024 (over February 2023), showed official data on Thursday.

The rate of inflation in February 2024 is primarily due to an increase in prices of food articles, crude petroleum and natural gas, electricity, machinery and equipment and motor vehicles, trailers and semi-trailers.

In January, it was at 0.27 per cent.

Economists say a little rise in wholesale inflation is good as it typically incentivizes goods manufacturers to produce more.

In April last year, the wholesale inflation went into negative territory. Similarly, in the initial days of COVID-19, in July 2020, the WPI was reported negative.

Overall wholesale inflation was 8.39 per cent in October 2022 and has fallen since then. Notably, the wholesale price index (WPI)--based inflation had been in double digits for 18 months in a row till September 2022.

The government releases index numbers of wholesale prices on a monthly basis on the 14th of every month (or the next working day). The index numbers are compiled with data received from institutional sources and selected manufacturing units across the country.

Meanwhile, retail inflation in India eased a tad in February to 5.09 per cent from 5.10 per cent the prior month, due to the deceleration of prices in all categories except food. Within food inflation, protein items (meat, egg) inflation increased exorbitantly (in the range of 400-500 basis points) in February month as compared to January.

The retail inflation in India though is in RBI's 2-6 per cent comfort level but is above the ideal 4 per cent scenario.

Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively to 6.5 per cent since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.