WPI to be around 3 per cent in FY 25, say economists

By IANS | Published: May 15, 2024 12:15 AM2024-05-15T00:15:47+5:302024-05-15T00:20:05+5:30

Chennai, May 15 The Wholesale Price Index (WPI) is expected to be in the region of 2-3 per ...

WPI to be around 3 per cent in FY 25, say economists | WPI to be around 3 per cent in FY 25, say economists

WPI to be around 3 per cent in FY 25, say economists

Chennai, May 15 The Wholesale Price Index (WPI) is expected to be in the region of 2-3 per cent over the next two quarters and average at around 3 per cent for FY25, top economists at two credit rating agencies said as the Commerce and Industry Ministry announced the WPI for April 2024 was 1.26 per cent.

Reacting to the numbers, Suman Chowdhury, Chief Economist and Head, Research, Acuite Ratings & Research said: "WPI trajectory in India is finally showing signs of a pickup, rising to 1.26 per cent YoY (year-on-year) in April '24 from 0.53 per cent YoY in March '24."

He said this is the highest WPI print in the last 13 months and has been driven by a reversal from deflation to inflation at 1.4 per cent YoY in fuel and power inflation; a rise in global crude prices and its derivatives along with rising higher power tariffs are the factors behind the rise in this category.

"Expectedly, the wholesale food group inflation has also seen a rise to 5.5 per cent YoY, reflecting higher vegetable and fruit prices," he said.

The wholesale inflation for manufactured goods has persisted in the contractionary zone at minus 0.4 per cent YoY, though the extent of deflation has reduced.

Since March '23, i.e. for the last 14 months, manufacturing inflation has remained in a deflation mode, implying benign input costs for the industrial segment in the absence of a strong global demand.

However, a stronger domestic economy and demand may soon lead to a firm-up in manufacturing inflation, Chowdhury opined.

According to him, with a rising outlook for fuel and power as well as manufacturing inflation in the near term, WPI inflation is set to test higher levels in the current year.

Overall, the WPI inflation print will also be shaped by the trend in the food category and is expected to remain between 2.0 per cent-3.0 per cent over the next two quarters, unless there are major surprises on commodity prices, he said.

"This will also make it difficult for headline CPI inflation to moderate towards 4.5 per cent in FY25, thereby making it also difficult for RBI to take a call on rate cut in the first half of the year," Chowdhury said.

According to Rajani Sinha, Chief Economist, CARE Ratings, the wholesale inflation of fuel and power entered positive territory after 11 months in April.

Brent crude oil prices had touched $90/bbl in April due to supply chain disruptions in the Middle East amid geopolitical conflicts.

While Brent crude prices have moderated in the past couple of weeks, the recent uptick in global commodity prices, especially industrial metal prices, warrants close monitoring as it can result in higher input costs. Industrial metal prices have risen by about 20 per cent in the past three months, Sinha said.

"Going ahead, the base effect will remain adverse over the next two months, thereby resulting in higher WPI inflation. External risks emerging from ongoing geopolitical tensions also need to be monitored, given the risk they can pose to supply chains," she said.

According to Sinha, the outlook for food inflation has brightened due to anticipations of a normal monsoon, which is expected to bolster agricultural production. However, monitoring the monsoon's temporal and spatial distribution is critical.

"We expect WPI inflation to average around 3 per cent in FY25," she said.

Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor

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