Inflation cools to 7-month low of 5.05% in January

Wholesale inflation eased to a seven-month low of 5.05% in January, on decline in the rate of price rise in food articles, mainly vegetables.

This is the second straight month of decline in wholesale price based inflation. The WPI was at 6.16% in December.

During January, inflation in food articles came down sharply to 8.80% as against 13.68% in the preceding month, according to the Wholesale Price Index (WPI) data released today. Vegetables inflation came down sharply to 16.60%, compared to 57.33% in December. The rate of price rise in onion eased to 6.59% in January, from 39.56% in December. Inflation in potato stood at 21.73% in January.

Fruits were cheaper as were protein-rich items such as eggs, meat and fish. However, inflation in milk inched up slightly to 7.22% in January. Data released earlier this week showed that retail inflation declined to a 2-year low of 8.79% in January, while industrial output contracted by 0.6% in December. The decline in inflation is much on the expected lines of the Reserve Bank, which had hiked key interest rates by 0.25% in its monetary policy review last month.

The Reserve Bank factors both retail and wholesale price based inflation data in its monetary policy. There have been demands from various quarters that the RBI should look at relaxing interest rates as inflation was showing signs of easing and slowdown persisted in industrial output.

According to the WPI data, inflation in primary articles basket and the fuel and power segment was at 6.84% and 10.03%, respectively. Inflation in manufactured products such as sugar and edible oils was up marginally at 2.76% on a monthly basis.