Wholesale Inflation Worsens To 3.1% In January Amid Economic Slowdown: 10 Points

The RBI tracks consumer inflation primarily for formulating its monetary policy.

Wholesale Inflation Worsens To 3.1% In January Amid Economic Slowdown: 10 Points

Wholesale food inflation softened to 10.12% in January from 11.05 per cent in the previous month

Wholesale inflation worsened to 3.1 per cent in January from 2.59 per cent in the previous month, government data showed on Friday. The release of official data on wholesale inflation - or the rate of increase in wholesale prices - comes at a time when the economy is staring at the worst pace of annual expansion in more than 11 years, and the central bank has paused further monetary easing after reducing the key rates by 135 basis points (1.35 percentage point) last year.

Here are 10 things to know:

  1. The build-up inflation rate came in at 2.50 per cent so far this financial year, as against 2.49 per cent in the corresponding period a year ago, the Ministry of Commerce said in a statement. In January 2019, wholesale inflation had stood at 2.76 per cent. 

  2. Wholesale food inflation - or the rate of increase in wholesale food prices - softened to 10.12 per cent last month compared with 11.05 per cent in December, the data showed.

  3. Food inflation is expected to remain in double-digits in February despite easing of vegetable prices, say economists.

  4. "Wholesale primarily food inflation recorded a limited correction, driven predominantly by vegetables and to a mild extent, pulses, even as milk and non-vegetarian protein items recorded a hardening of inflation," said Aditi Nayar, Principal Economist at credit ratings agency ICRA.

  5. In the food articles category, vegetable prices surged 52.72 per cent mainly on account of 293 per cent and 37.34 per cent inflation in onions and potatos respectively.

  6. "The impact of the spread of the coronavirus on risk sentiment and commodity prices, including crude oil, is expected to exert a substantial moderation on the wholesale inflation in February 2020," added Ms Nayar of ICRA.

  7. Separate data released this week showed consumer inflation in January hit the highest level recorded since May 2014, dashing hopes of further monetary easing by the central bank for the time being. 

  8. The Reserve Bank of India (RBI) tracks consumer inflation primarily for formulating its monetary policy. 

  9. This month, the central bank kept the key rates unchanged at existing levels while maintaining the status quo on its "accommodative" policy stance in its sixth bi-monthly review of current financial year.

  10. In 2019, the RBI lowered the repo rate - or the key interest rate at which it lends short-term funds to commercial banks - in five out of six bi-monthly policy reviews to aid growth. In finally kept the rates unchanged in the December and February reviews.



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