Jan-25 WPI inflation tapers to 2.31% as food prices ease further

17 Feb 2025 , 09:23 AM

JAN-25 WPI INFLATION EASES BY 6 BPS TO 2.31%

After the sharp bounce in December 2024; the wholesale price index (WPI) inflation for January 2025 eased by 6 bps to 2.31%. While food prices eased in line with agricultural flows into mandis, there was a spike in energy inflation as well as manufacturing WPI.

Month	WPI Inflation (%)	CPI Inflation (%)
Jan-24	0.33%	5.10%
Feb-24	0.20%	5.09%
Mar-24	0.26%	4.85%
Apr-24	1.19%	4.83%
May-24	2.74%	4.80%
Jun-24	3.43%	5.08%
Jul-24	2.10%	3.60%
Aug-24	1.25%	3.65%
Sep-24	1.91%	5.49%
Oct-24	2.75%	6.21%
Nov-24	2.16%	5.48%
Dec-24	2.37%	5.22%
Jan-25	2.31%	4.31%

Data Source: Office of the Economic Advisor

What is interesting is that the marginally lower WPI inflation in January 2025 was despite the 53 bps lower base, which means the WPI inflation should have actually been lower. For instance, between December 2023 and January 2024, the WPI inflation had actually fallen from 0.86% to 0.33%. That means, shorn of the base effect, the actual fall in WPI inflation in January 2025 would have been much larger. In January 2025, food prices eased, but it was the energy and the manufacturing basket that continued to put pressure on the WPI.

The actual impact has come from a mix of controverting factors like steady oil prices, easing tensions in West Asia and the . In terms of previous revisions, the November 2024 WPI inflation got revised upwards from 1.89% to 2.16%. Cumulative 10-month inflation in FY25 stands at 2.22% versus -0.92% in the corresponding 10 months of previous financial year.

READING THE WPI INFLATION 10-MONTH TREND?

Let us look at smoothened WPI inflation on a cumulative 10-month basis for FY25.

• The headline WPI inflation for FY25 stood at 2.22%, compared to -0.92% in comparable 10 months of FY24. This is due to the fact that in the previous financial year, 8 out of the 12 months had reported contraction in WPI.
• The primary basket WPI for FY25 at 5.81% is sharply higher than the corresponding FY24 figure of 3.33%. This has been triggered by food basket WPI inflation surging from 6.52% last year to 8.27% in FY25. Minerals inflation actually tapered in FY25 by 300 bps.
• Let us turn to the Energy Basket. This basket saw WPI inflation hardening from -5.19% to -1.73%; albeit in contraction mode. The pressure came from a spike in LPG and high speed diesel (HSD) prices in FY25.
• What about manufacturing basket with 64.23% weightage? As supply chains normalized, manufactured products inflation for FY25 turned around to 1.45% from -1.81% in FY24. This has triggered higher input costs and thinner OPMs for Indian corporates in Q3FY25.

The pressure on the manufacturing basket is fairly pronounced in January 2025.

WPI INFLATION SHIFTS: YOY AND MOM

Let us first look at how the WPI inflation basket across primary products, fuel & power, and manufacturing products shifted in last 3 months. This inflation is year-on-year.

Commodity Set	Weight	Jan-25 WPI	Dec-24 WPI	Nov-24 WPI
Primary Articles	0.2262	4.69%	6.02%	5.49%
Fuel & Power	0.1315	-2.78%	-3.79%	-4.03%
Manufactured Products	0.6423	2.51%	2.14%	2.07%
WPI Inflation	1.0000	2.31%	2.37%	2.16%
Food Basket	0.2438	7.47%	8.89%	8.86%

Data Source: Office of the Economic Advisor

Here are some key observations. Firstly, in the primary basket, December 2024 has seen pressure from minerals, onions, pulses, and cereals. Secondly, oil continues to put pressure due to the base effect and also due to proposed fresh sanctions by the US on Russia. Lastly, manufacturing inflation displays signs of stress, especially amidst rising industrial input costs. Let us now turn to the high frequency MOM data.

Commodity Set	Weight	Jan-25 WPI	Dec-24 WPI	Nov-24 WPI
Primary Articles	0.2262	-2.01%	-2.07%	-1.35%
Fuel & Power	0.1315	0.47%	0.00%	0.74%
Manufactured Products	0.6423	0.14%	-0.07%	0.14%
WPI Inflation	1.0000	-0.45%	-0.64%	-0.19%
Food Basket	0.2438	-2.30%	-2.15%	-0.99%

Data Source: Office of the Economic Advisor

The short term pressures is essentially coming from across the food, minerals, energy, and manufacturing  baskets.

WPI BASKET – BIG SWING FACTORS IN JANUARY 2025

Swing factor are drivers that trigger the shift in WPI. The left hand side (LHS) looks at positive drivers; while right hand side (RHS) looks at negative drivers for WPI (product-wise).

Commodity	WPI Inflation	Commodity	WPI Inflation
Onions	23.04%	Vegetable Oils & Fats	-15.59%
Vegetables	19.02%	Oil Seeds	-9.18%
Pulses	15.95%	Potatoes	-8.18%
Minerals	10.58%	Paper Products	-6.47%
Paddy	9.51%	Semi-Finished Steel	-6.16%
Milk	5.44%	Chemical Products	-5.51%
Tobacco Products	5.00%	High Speed Diesel (HSD)	-5.29%
Cereals	4.60%	Basic Metals	-4.60%
Crude Petroleum	4.13%	Textiles	-2.26%
Wood Products	3.49%	Cement, Lime & Plaster	-1.22%

Data Source: Office of the Economic Advisor

Most of the upward pressure on WPI inflation is still coming from food product basket, although it is not down to just 6 out of the 10 swing products. Among others, minerals and crude petroleum are also from the primary basket, while tobacco products and wood products are from the manufacturing basket. Out of the 10 negative swing drivers, 7 are from the manufactured products; but clearly, manufacturing inflation is rising.

WHAT ARE THE WPI TAKEAWAYS FROM Q3FY25

The corporate results for Q3FY25 indicate that the real issue is not about a demand slowdown, but about pressure on the operating profit margins. This is largely because there has been an across the board spike in the cost of physical and service inputs. That is what investors and analysts are worried about, and it explains the recent FPI sell-off in Indian markets as well as the 13% correction from the top. Perhaps, it also makes a fit case for the RBI to persist with rate cuts; after cutting 25 bps in January 2025!