Wholesale inflation rose to a two-month high of 2.38% in February

Wholesale inflation for February

India’s wholesale inflation rose to a two-month high of 2.38 percent in February from 2.3 percent in the previous month as a drop in food prices was offset by a spike in manufactured products.

Manufacturing items account for nearly two-thirds of the index, unlike retail inflation, where food has a higher weight of almost 50 percent.

Retail inflation declined for the months, as consumer prices slipped to a seven-month low of 3.6 percent, with food prices at their lowest level in 21 months.

Core inflation rose at its fastest pace in seven months.

Wholesale inflation is likely to stay around current levels in the coming months. The Purchasing Managers’ Index released on March 3 signalled that producers faced rising input cost pressures and cost was passed on to consumers on account of higher demand.

Crude below $80 a barrel is expected to provide further support on the inflation front.

The fall in consumer inflation has brightened the chances of the Reserve Bank of India’s Monetary Policy Committee (MPC) deliver a successive second rate cut in its April meeting.

In February, the MPC reduced the repo rate by 25 basis points, first such cut in five years, as RBI forecasted inflation to decline to its target of 4 percent.

The policy rate is likely to fall to 6 percent in April with another 25 bps cut on the anvil. The rate-cut cycle, however, will be suboptimal and that RBI will not push rates below 5.75 percent.