, India

Here's why food prices are still India's economic 'wildcard'

Its CPI weightage is almost 50%.

According to DBS, the firmer-than-consensus January IP release earlier this week along with another over 10.0%+ on CPI inflation have tempered expectations of a rate cut at next week’s RBI policy review.

In this context, today’s February WPI inflation print will be watched closely. "Our estimate at 6.5% (YoY), from 6.6% the month before, factors in first-round impact from the gradual adjustment in diesel prices, reflected in the sequential trend," DBS said.

Here's more from DBS:

Food prices, however, remain the wildcard. With a near 50% weightage in the consumer price index, the food component has risen by an average of 10.5% since January 2012 (since the start of the new series), outpacing the headline CPI inflation at 9.8%.

Comparatively, food prices constitute about 25% of the wholesale price index. With a smaller weightage, the index is relatively shielded from the vagaries in supplies, though on the other hand is also less representative of the price pressures faced by the end-consumers.

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