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Business News/ Politics / Policy/  Wholesale prices fall 2% in February
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Wholesale prices fall 2% in February

While fuel and power prices fell 14.72%, food prices rose 7.74%, according to data released by commerce ministry

The government also revised the December WPI to -0.5% from 0.1% reported earlier. Photo: Ramesh Pathania/MintPremium
The government also revised the December WPI to -0.5% from 0.1% reported earlier. Photo: Ramesh Pathania/Mint

New Delhi: Inflation based on the wholesale price index (WPI) declined for the fourth consecutive month at -2.06% in February from -0.39% in January, mainly due to a drop in fuel prices even as food prices rose.

Fall in global crude prices have helped India, a major crude oil importer, reduce its import bill and curtail inflation.

However, rising food prices, particularly those of vegetables, are likely to exert an upward pressure on prices.

While fuel and power prices fell 14.72% in February, food prices rose 7.74%, according to data released by the commerce ministry.

While vegetable prices rose 15.5%, fruit prices gained 16.84%.

Prices of onion, a politically sensitive commodity, rose over 26% in February.

Manufactured products inflation also slowed for the fourth consecutive month at 0.33% as a fragile economic recovery restricted sharp price increases by manufacturers.

The government also revised the December WPI to -0.5% from 0.1% reported earlier.

Crude oil prices are likely to remain low in 2015, rating company Moody’s Investors Service said in a report released on Monday.

“Despite a 17% rebound in February to $59 per barrel, we continue to forecast that Brent oil prices will remain around $55 pb (per barrel) in 2015, $65 pb in 2016 and $72 pb in 2017," the report said.

The price of the Brent crude dropped by almost 60% between June 2014 and January 2015, reaching a six-year low of $47 per barrel in January.

Oil ministry data shows the price of the Indian crude basket was at $54.56 on 13 March.

“India benefits from lower oil prices through lower inflation, an improved trade balance and reduced fuel subsidy costs," Moody’s said.

“Looking ahead, sustained lower oil (and other commodity) prices will support the growth acceleration we expect in 2015 and 2016 by preventing a build-up of inflation and current account deficits."

The Moody’s report added that annual fuel and light inflation will continue to decline during much of 2015 because of the high base effect.

Last week, separate data released by the government showed that while retail inflation based on the consumer price index (CPI) accelerated to 5.37% in February from 5.19% in the previous month because of higher food and fuel prices, growth in the index of industrial production (IIP) slowed to 2.6% in January from 3.2% in December.

Economists point out that unseasonal rain in February and March and the consequent impact on vegetable cultivation and their prices could see the Reserve Bank of India (RBI) hold policy rates in its bimonthly monetary policy review on 7 April.

According to the monetary policy framework signed between the government and RBI in February, retail inflation should be within 6% by January 2016.

RBI has cut the key repo rate by a cumulative 50 basis points in the last two months though banks are yet to pass on the benefits to consumers.

Citigroup Inc. economists Rohini Malkani and Anurag Jha said in a note that soft input prices, moderate demand conditions and anti-inflation policies of government and RBI will likely keep inflation in check in 2015-16.

“We expect RBI to normalize policy rates with a further 50bps cut by FY16 on benign inflation outlook, better quality of fiscal consolidation and global factors," they said.

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Published: 16 Mar 2015, 12:42 PM IST
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