Good News! WPI Inflation Set for Downward Turn in February 2025, Oil & Food Prices Play Major Role

WPI Inflation: A recent report from Union Bank of India predicts that India’s Wholesale Price Index (WPI) inflation will decline to 2% in February 2025, down from 2.3% in January. The report attributes this drop to falling oil prices and a seasonal dip in food costs. It also highlights key trends shaping inflation, providing insights into the factors influencing price movements in the country.

Drop in Food Prices Drives WPI Inflation Lower

A significant contributor to the easing of WPI inflation is the decline in food prices, particularly vegetables. Vegetable prices, a major component of food inflation, fell by 12% month-on-month in February. This seasonal cooling helped offset slight increases in edible oil prices. Meanwhile, manufactured food prices remained stable, with only marginal rises in inputs like sugar and edible oil. These trends underscore the role of food prices in shaping India’s Wholesale Price Index.

Fuel Prices Remain in Negative Territory

The fuel index, which tracks petroleum product prices, is expected to stay in the negative zone in February. This follows a slight uptick in the previous two months. The report links this decline to global economic concerns during the second term of U.S. President Donald Trump, which have reduced oil demand. Lower fuel prices have played a crucial role in moderating WPI inflation, reflecting the interconnectedness of global and domestic markets.

Core WPI Shows Signs of Moderation

Core WPI, which excludes food and fuel, also eased in February. A drop in global energy prices helped reduce inflationary pressures. However, rising metal prices partially offset this decline. Core WPI reflects price movements in non-food manufactured products, heavily influenced by global commodity prices. With over 40% of raw materials used in Indian manufacturing being imported, fluctuations in global prices directly impact domestic inflation.

Outlook: WPI Inflation Likely to Trend Downward

The report predicts that WPI inflation will continue its downward trajectory, supported by softening fuel and commodity prices worldwide. Seasonal cooling in food prices is also expected to contribute to lower inflation levels. However, ongoing trade wars and global supply chain disruptions remain potential risks that could influence future price trends. These factors will be closely monitored in the coming months to assess their impact on India’s Wholesale Price Index.