India's wholesale price index increased by 2.48 percent on the year in February, down from 2.84 percent in January. Consumer price index data published earlier in the week also showed a decline in headline inflation from 5.07 percent to 4.44 percent, closer to the mid-point of the Reserve Bank of India's target range of 2.0 percent to 6.0 percent. The index was flat on the month after increasing 0.09 percent previously.
As with CPI inflation, the fall in headline WPI inflation in February largely reflects a weaker increase in food and fuel prices. Food prices, which account for around 15 percent of the index, increased by just 0.88 percent on the year in February, down from 3.00 percent in January, with year-on-year price gains in vegetables falling from 40.77 percent to 15.26 percent. The year-on-year increase in fuel and power prices (around 13 percent of the index) also slowed from 4.08 percent in January to 3.81 percent in February. In contrast, inflation for manufactured products (around 64 percent of the total index) picked up from 2.78 percent to 3.04 percent.
Last month the Reserve Bank of India left policy rates on hold and retained a "neutral" stance. Officials also highlighted their commitment to keeping CPI inflation close to 4.0 percent but noted that that risks to their forecasts are skewed to the upside. The declines in headline CPI and WPI inflation seen in the last two months, however, may reassure officials that price pressures remain relatively contained and strengthen the case for policy rates to stay on hold for longer.