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India's Wholesale Price Index (WPI) inflation is expected to decline to 2 per cent in February 2025 from 2.3 per cent in January, primarily due to a drop in oil prices and a seasonal decline in food prices, according to a report by Union Bank of India.
The report highlighted that the moderation in WPI inflation is largely driven by a fall in vegetable prices, which is a key component of food inflation. It said "Wholesale Price Index (WPI) is expected to moderate to 2.0 per cent (y/y) in Feb'25, low from 2.3 per cent in previous month, due to cooling in oil prices and seasonal drop in food prices". Within food, vegetable prices are estimated to have dropped by 12 per cent month-on-month. However, edible oil prices saw a slight increase during the month. Additionally, manufactured food prices remained stable as the prices of key inputs like sugar and edible oil showed only a mild rise. The report also added that the fuel index, which tracks price changes in petroleum products, is expected to remain in the negative zone in February. This decline follows a slight increase in the past two months. The report attributed the fall in fuel prices to global economic concerns under the second term of U.S. President Donald Trump, which have led to a decrease in oil demand. Meanwhile, core WPI--which excludes food and fuel--also showed signs of moderation in February. A decline in global energy prices contributed to the easing of inflationary pressures. However, a surge in metal prices limited the extent of the decline. Core WPI reflects the price movements in non-food manufactured products, which are closely linked to global commodity prices. Since more than 40 per cent of raw materials used in manufacturing are imported, any changes in global commodity prices have a direct impact on domestic inflation. Looking ahead, the report stated that WPI inflation is expected to continue its downward trend due to softening fuel and commodity prices worldwide. Additionally, seasonal cooling in food prices is likely to contribute to lower inflation levels. However, the report cautioned that ongoing trade wars and disruptions in global supply chains could influence future price trends. The impact of these factors will be closely monitored in the coming months. (ANI)
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