India’s Wholesale Inflation Rises to 2.38% in February: What It Means for the Economy
New Delhi:
Inflation Rises : India’s wholesale inflation, measured by the Wholesale Price Index (WPI), increased to 2.38% in February 2025, slightly higher than the 2.31% recorded in January. This rise was primarily due to a slower decline in fuel and power prices and an increase in the prices of manufactured products, according to provisional data released by the Union Commerce Ministry.
Although the latest inflation figures were marginally above the 2.36% projected by economists in a Reuters poll, they indicate a mixed trend, with food prices showing signs of softening while other sectors witnessed price hikes.
Key Factors Behind the Inflation Rise
1. Food Prices Show Signs of Relief
Food prices, which hold significant weight in the WPI basket, increased by 5.94% in February compared to the same period last year. However, they were lower than the 7.47% recorded in January and 8.85% in December, signaling some relief.
- Cereal Prices: Increased by 6.77% in February, lower than January’s 7.33%.
- Vegetables: Prices declined by 5.80%, contrasting the sharp 8.35% increase in January.
- Onions and Fruits: Witnessed an uptick in February.
Economists attribute the food price fluctuations to weather conditions, supply chain disruptions, and trade policies. Uneven monsoon rains between November 2023 and June 2024 led to higher food prices in the past year.
“Food inflation softened, largely helped by a broad-based slowdown. Vegetables saw the sharpest price correction, followed by food grains and protein-based items such as milk, eggs, meat, and fish,” said Sonal Badhan, economist at Bank of Baroda.
2. Rising Costs in Manufacturing and Fuel Sectors
Manufactured products, which contribute to around 64% of the WPI, saw an annual price increase of 2.86% in February, up from 2.51% in January and 2.14% in December.
- Fuel and power prices declined by 0.71% year-on-year, but this was a smaller contraction compared to 2.78% in January and 2.57% in December.
- Prices of non-food articles surged by 4.84% in February, compared to 2.95% in January.
“The downward pressure on food inflation was countered by narrowing deflation in fuel prices and an uptick in core inflation (non-food manufacturing) to a 24-month high of 1.3%,” said Rahul Agrawal, senior economist at ICRA Ltd.
Impact on Consumers and Economy
While wholesale inflation increased, retail inflation (CPI) eased to 3.61% in February, down from 4.26% in January. This is an encouraging sign for consumers, as it reflects a potential slowdown in price increases at the retail level.
The Reserve Bank of India (RBI) has been actively working to tame inflation through interest rate adjustments. In February, the Monetary Policy Committee (MPC) decided to reset the repo rate to 6.25%, marking the first rate cut since the COVID-19 pandemic.
Higher interest rates reduce borrowing and spending, which can help control inflation over time. The RBI’s inflation target remains at 4%, with a tolerance range of ±2%.
Key Financial Ratios – February 2025
| Indicator | February 2025 | January 2025 | December 2024 |
|---|---|---|---|
| Wholesale Inflation (WPI) | 2.38% | 2.31% | 2.14% |
| Retail Inflation (CPI) | 3.61% | 4.26% | 4.91% |
| Food Inflation (WPI-Food) | 5.94% | 7.47% | 8.85% |
| Manufactured Products | 2.86% | 2.51% | 2.14% |
| Fuel & Power Inflation | -0.71% | -2.78% | -2.57% |
| Repo Rate (RBI) | 6.25% | 6.50% | 6.50% |
Future Outlook: What Lies Ahead?
As global markets face uncertainties due to trade tensions and monetary policy shifts in the US, India’s inflation trajectory remains volatile.
“As the US Federal Reserve delays interest rate cuts, and global trade frictions intensify, inflationary pressures could re-emerge. Commodity prices are already showing signs of upward movement,” added Badhan.
Key factors to watch in the coming months:
- Global commodity price trends (oil, metals, food).
- RBI’s monetary policy actions.
- Impact of upcoming summer and monsoon seasons on food inflation.
Frequently Asked Questions (FAQs)
1. Why did India’s wholesale inflation rise to 2.38% in February?
The increase was driven by higher prices in manufactured goods and a slower decline in fuel and power prices, even as food prices softened.
2. How does wholesale inflation affect consumers?
WPI reflects producer prices, which eventually influence retail prices (CPI). Higher WPI inflation can lead to increased costs for consumers in the long run.
3. Why did food inflation slow down in February?
Food prices, especially vegetables and grains, saw a decline due to better supply conditions and seasonal factors.
4. How does the RBI control inflation?
The Reserve Bank of India adjusts interest rates (repo rate) to control inflation. A higher interest rate discourages borrowing and spending, reducing demand-driven inflation.
5. What is the significance of retail inflation (CPI) falling to 3.61%?
A lower CPI means households face less burden of rising costs, improving purchasing power and economic stability.
6. Will inflation continue to rise in the coming months?
It depends on global economic conditions, commodity prices, and government policies. Factors like monsoon patterns and fuel prices will play a crucial role.
Final Thoughts
India’s wholesale inflation rise to 2.38% in February 2025 presents a mixed picture—while food inflation is cooling, core manufacturing and fuel prices are rising. The RBI’s monetary policies, global trade developments, and weather conditions will shape inflation trends in the coming months.
With retail inflation falling and interest rates being adjusted, policymakers are focused on stabilizing the economy while ensuring growth. However, global uncertainties remain a key challenge in keeping inflation under control.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.