India's Wholesale Inflation Expected To Drop To 2% In February, Says Report. Here's Why

The report also noted that the decline in WPI inflation is primarily driven by a reduction in vegetable prices, a major contributor to food inflation

Core WPI reflects the price movements of non-food manufactured products, which are closely tied to global commodity prices

Source : ABPLIVE AI

India's Wholesale Price Index (WPI) inflation is expected to decrease to 2 per cent in February 2025, down from 2.3 per cent in January, mainly due to a drop in oil prices and a seasonal dip in food prices, according to a report by Union Bank of India. The report noted that the decline in WPI inflation is primarily driven by a reduction in vegetable prices, a major contributor to food inflation.

The report said, "Wholesale Price Index (WPI) is expected to moderate to 2.0 per cent (y/y) in Feb'25, low from 2.3 per cent in the previous month, due to cooling in oil prices and a seasonal drop in food prices."

Within the food category, vegetable prices are estimated to have fallen by 12 per cent month-on-month. However, edible oil prices saw a slight uptick during the month. Meanwhile, manufactured food prices remained stable, as the costs of key inputs such as sugar and edible oil experienced only a mild rise, it said.

The report also mentioned that the fuel index, which tracks price changes in petroleum products, is expected to stay in the negative territory in February, following a slight increase over the past two months.

Fuel Prices

The report attributed the decline in fuel prices to global economic concerns during the second term of US President Donald Trump, which led to reduced oil demand.

Meanwhile, core WPI, which excludes food and fuel, showed signs of moderation in February. A drop in global energy prices helped ease inflationary pressures. However, a rise in metal prices limited the extent of this decline.

Core WPI reflects the price movements of non-food manufactured products, which are closely tied to global commodity prices. Since over 40 per cent of raw materials used in manufacturing are imported, any fluctuations in global commodity prices directly affect domestic inflation.

Looking ahead, the report suggested that WPI inflation is likely to continue its downward trend due to the softening of fuel and commodity prices globally. Additionally, the seasonal decline in food prices is expected to contribute to lower inflation levels.

However, the report also cautioned that ongoing trade wars and disruptions in global supply chains could impact future price trends, and these factors will be closely monitored in the months to come.