India's wholesale inflation saw a slight increase in February, reaching 2.38 pc compared to 2.31 pc in January, according to official data. This rise marked the highest level in eight months.
In contrast, retail inflation dropped to a seven-month low of 3.61 pc, primarily due to a decline in food prices, with food inflation falling from 5.97 pc in January to 3.75 pc in February.
The government attributed the rise in wholesale inflation to increasing prices of manufactured food products, non-food articles, textiles, and other manufacturing items.
However, the rate of increase was marginal and aligned with market expectations. The wholesale inflation rate was slightly above the 2.36 pc projected by economists in a Reuters poll.
Food inflation in the wholesale segment slowed down to 5.94 pc in February from 7.47 pc in the previous month.
The prices of primary articles also eased, with inflation declining to 2.81 pc from 4.69 pc in January.
Meanwhile, fuel and power prices continued to contract, registering a decline of 0.71 pc compared to a 2.78 pc contraction in January. Prices of manufactured goods, which account for nearly two-thirds of the wholesale price index, saw an increase of 2.86 pc in February, up from 2.51 pc in the previous month.
Over the past few months, inflationary pressures in India have been easing due to favourable weather conditions, leading to better vegetable production and improved supplies.
This has raised expectations of possible interest rate cuts in the coming months. The fall in retail inflation has also contributed to a positive outlook for consumers and businesses.
Data from the government highlighted that retail inflation, measured by the Consumer Price Index (CPI), declined in February, largely due to lower food prices.
The food inflation rate, which constitutes a significant portion of the CPI, dropped to 3.75 pc in February from 5.97 pc in January.
This trend suggests that food prices are stabilising, providing some relief to households.
Wholesale inflation for food items showed mixed trends.
Onion prices surged sharply, with inflation rising to 48.05 pc in February from 28.33 pc in January. In contrast, potato inflation eased significantly, dropping to 27.54 pc from 74.28 pc during the same period.
Vegetable inflation as a whole contracted, registering a decline of 5.80 pc year-on-year compared to an 8.35 pc increase in January.
Pulses also saw a price drop, with inflation standing at -1.04 pc in February, down from 5.08 pc in January.
Cereal prices, however, continued to rise, though at a slower pace, increasing by 6.77 pc in February compared to 7.33 pc in January.
In its February meeting, the Reserve Bank of India's (RBI) Monetary Policy Committee observed that inflation had been declining due to easing food prices.
The central bank expects inflation to moderate further in the next fiscal year, which could provide economic relief.
The RBI, under its new Governor Sanjay Malhotra, is tasked with keeping inflation within the 2-6 pc range.
For the financial year 2025-26, the central bank has projected an average inflation rate of 4.2 pc.
The quarterly inflation forecasts for FY26 stand at 4.5 pc in the first quarter, 4.0 pc in the second, 3.8 pc in the third, and 4.2 pc in the fourth.
Malhotra noted that inflation had steadily declined from a peak of 6.2 pc in October 2024, helped by falling vegetable prices in November and December.
The RBI expects consumer inflation to average 4.8 pc in FY25, with further easing likely in FY26, provided the monsoon remains normal.
The Economic Survey for 2024-25, released in January, projected that food inflation would continue to soften in the final quarter of FY25.
However, the report also warned of potential economic risks due to global uncertainties.
Concerns such as currency depreciation, inflation fluctuations, and declining foreign investment remain key challenges for India’s economic stability.
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