WPI inflation falls to 5-1/2 year low of -0.39 per cent y-o-y in January

Inflation declined to a five and a half year low of (-)0.39 per cent in January on the back of falling prices of manufactured and fuel items even though prices of food articles remained high.

The last time inflation had touched this low a level was in June 2009 when it stood at (-)0.4 per cent.

Inflation measured on wholesale price index (WPI) stood at 0.11 per cent in December. The data for November was revised downwards to a negative (-)0.17 per cent, from the provisional estimate of zero.

However, food inflation witnessed a rising trend in January and scaled to a six-month high of 8 per cent, as per the government data released on Monday. The rate of price rise in pulses, vegetables and cereals was higher in January over December. On the other hand, inflation in potato, milk, rice and protein rich items like egg, meat and fish was slower in the month under review.

Inflation in 'fuel and power segment' was negative at (-)10.69 per cent, while in manufactured products it stood at 1.05 per cent. The data further showed that the contraction in WPI inflation for petrol was steeper at 17.08 per cent in January from 11.96 per cent in the previous month.

Similarly the rate of decline in diesel prices in January was higher than in December. The inflation in the primary articles segment inched up to 3.27 per cent in January, as against 2.17 per cent last month.

Reserve Bank of India Governor Raghuram Rajan, in his monetary policy review on February 3, kept key interest rates unchanged saying the central bank wanted more comfort on inflation front as it awaited cues from Finance Minister Arun Jaitley's first full-year Budget.

Rajan said retail inflation was likely to be around the target level of 6 per cent by January 2016 but flagged monsoon and oil prices as upside risks.

As per data, retail inflation moved up to 5.11 per cent in January month-on-month, measured on a new base year 2012, mainly due to dearer food items including fruits and vegetables.