WPI Inflation Likely To Cool Further In January: Icra

India's wholesale price index (WPI) inflation eased to a lower-than-expected 5.0 per cent in December 2022 and is likely to cool further in January 2023, said rating agency Icra.

The rating agency projected the WPI inflation to slip below 5 per cent in January 2023, printing between 4.5 per cent to 4.9 per cent, before easing to sub-2 per cent by March 2023, unless commodity prices post a strong rebound.

With the sequential fall in average wholesale prices of several food items in early January 2023, the YoY food inflation is likely to witness an uptick in the month on account of an unfavourable base.

However, the monthly average of the USD/INR pair has strengthened in January 2023 so far, relative to December 2022, amidst a fall in the dollar index, which is likely to augur well for the landed cost of imports in the ongoing month. 

As per the early data released by the Department of Consumer Affairs, barring wheat and milk, the average wholesale prices of other food items such as edible oils, pulses, vegetables and sugar have declined in MoM terms during January 2023 so far.

Notwithstanding the sequential fall in average wholesale prices of several food items in early-January 2023, the YoY food inflation is likely to witness an uptick in the month on account of an unfavourable base, the rating agency mentioned.

While the healthy pace of rabi sowing (+2.9 per cent YoY as on 06 January 2023) has boosted the prospects for output and improved the food inflation outlook, the prices for crucial items such as rice, wheat and milk may remain elevated on account of supply constraints, low stocks and higher feed costs for livestock.