February WPI inflation at 4.17%, reaches 27-month high

A labourer carries a sack filled with pulses at a wholesale pulses market in Kolkata (Representative Image)

The Wholesale Price Index (WPI) numbers for February 2021 has been released by the Ministry of Commerce and Industry.

WPI inflation for the month is at 4.17 percent compared to 2.26 percent for the corresponding period in January 2021, as per a ministry release.

This is a 27-month high.

“The doubling in the WPI inflation to a 27-month high 4.2 percent in February 2021 from 2 percent in the previous month, was fairly broad-based, reflecting the rise in commodity prices brought on by the global risk-on sentiment, hardening of crude oil and fuel prices, as well as a fading of the favourable base effect for food items,” said Aditi Nayar, Principal Economist, ICRA.

WPI inflation was at 2.03 percent in January 2021 and at 2.26 percent in February 2020.

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"While the core inflation rose further to a series high 5.5 per cent in February 2021, the pace of month-on-month increase tempered, benefitting from the sequential dip recorded by basic metals," she said. Nayar however added that they expect core inflation to continue to chart an uptrend until May 2021.

WPI Food Index in February 2021 stood at 3.31 percent, an increase against (-)0.26 percent in the previous month.

The index for primary articles increased by 1.04 percent to 145.4 (provisional) in February, from 143.9 (provisional) for the month of January, 2021. Primary articles inflation is at 1.82 percent compared to (-)2.24 percent in the previous month.

Here, prices of Minerals (9.40 percent), Crude Petroleum & Natural Gas (6.50 percent) and Food Articles (0.51 percent) increased in February, 2021 as compared to January, 2021.

For prices of non-food articles, inflation was at (-)0.51 percent in February, a decline compared to January, 2021.

The index for the fuel and power group increased by 4.51 percent to 104.2 in February, from 99.7 (provisional) for the month of January, 2021.

Here, prices of Mineral Oils (8.88 percent) increased in February, 2021 as compared to January, 2021. Prices of Electricity (-0.43 percent) declined in February, 2021 as compared to January, 2021. Prices of coal remain unchanged.

The index for the manufactured products group increased by 0.64% to 125.7 in February, from 124.9 in January. Manufactured products inflation is at 5.81 percent compared to 5.13 percent in the previous month.

“Looking ahead, we expect large upticks in the WPI inflation over the next three months, as the wedge between the commodity prices and their year-ago level intensifies. We expect the headline and core WPI inflation to rise to around 6 per cent each in March 2021. Subsequently, we expect the headline WPI inflation to harden further to between 9-9.5 per cent , and the core-WPI inflation to climb to 7-7.5 per cent by May 2021, before displaying a more gradual moderation to 4 per cent each by the end of 2021,” Nayar said.

The Reserve Bank of India (RBI) in its monetary policy decision on February 5, kept interest rates unchanged for the fourth consecutive meeting and said that the near-term inflation outlook has turned favourable.

Meanwhile, retail inflation, based on the consumer price index (CPI), surged to 5.03 percent in February, data released last week showed.