Key Points
Vegetable prices fell 22.7% between December and January
14 out of 22 food items showed price easing
WPI projected to average 2.4% in FY2025
The year-on-year (YoY) WPI-food inflation softened to a five-month low of 7.5 per cent in January from 8.9 per cent in December 2024, almost entirely on account of a sharp fall in vegetables inflation, thereby exerting a downward pressure to the tune of 44 bps to the headline print between these months.
"The seasonal softening in food prices in January was somewhat larger than our expectations. Notably, vegetable prices fell by a sharp 22.7 per cent in January 2025 vis-a-vis December 2024," said Rahul Agrawal, Senior Economist, ICRA.
Among vegetables, tomato and potato prices registered a decline.
As per the data released by the Department of Consumer Affairs, the average wholesale prices of as many as 14 of the 22 food items eased on a sequential basis in February (till February 13), including rice, all pulses, milk, and some edible oils (groundnut and mustard oil) and vegetables (potato, onion, and tomato).
This was primarily driven by increased production and fresh arrival of crops across the country. Most of these items also reported a cooling in their year-on-year (YoY) inflation prints in February 2025 (till February 13, 2025) compared to January 2025.
Overall, "we project the WPI to average at 2.4 per cent in FY2025," said ICRA.
WPI inflation eased to 2.3 per cent in January from 2.4 per cent in December, led by moderation in food inflation.
Going forward, as Fed decides to keep rates 'higher for longer', global demand prospects have been dented and are putting some downward pressure on oil and other commodity prices, said Sonal Badhan economist, Bank of Baroda (BoB).
Meanwhile, for the month of November 2024, the final Wholesale Price Index inflation rate has been revised to 2.16 per cent.
