Will WPI inflation ease like CPI in January?

The Central Statistics Office (CSO) will be releasing India's Wholesale Price Index (WPI) inflation data for the month of January 2018 today at around 1200 hours.
 
The WPI inflation data released in December 2017 was at 3.58%, lower 3.93% to November 2017, and higher 2.10% in comparison with the same period a year ago.
 

source: tradingeconomics.com  

Correction in WPI was largely led by food inflation, partly mirroring the trends shown in CPI inflation. The primary food inflation contracted 4.3%, backed by 22% contraction in vegetables, 3% contraction in pulses and 2.3% contraction in egg, meat & fish. Overall primary food inflation moderated to 4.72% from 6.06% in November.
 
It may be mentioned that when WPI was stabilising in December month, retail inflation continues to harden.
 
Sujan Hajra and Pooja Banthia, economists at Anand Rathi, said the divergence between wholesale and retail inflation is again emerging, reflecting higher food and services inflation along with modest manufactured price inflation.
 
Also, RBI explicitly targeting retail inflation, monetary policy implications of WPI inflation have
eased. Consequently, the duo said, "softening of WPI inflation is unlikely to have any major policy implication."
 
The duo at Anand Rathi highlighted that softening of WPI inflation provides an important clue –wholesale food inflation is softening and this would have a sobering feedback effect on retail inflation as well.
At the same time, low WPI inflation also reflects the lack of pricing power and, thereby, soft demand for manufactured products.
 
Madhavi Arora, Upasna Bhardwaj and Suvodeep Rakshit, analysts at Kotak Institutional Equities, said, "Weakening food inflation dynamics contributed the most to moderating headline WPI inflation, largely mirroring the trends seen in CPI inflation. Even as WPI inflation has been trending higher since August 2017 largely due to fading base effect, it will remain soft to average ~3.0% in FY2018."
 
The trio from Kotak added, "We expect the remainder of FY2018 to be range-bound as far as WPI inflation prints are concerned. On an average, we expect FY2018 WPI inflation to average ~3.0% as against 1.7% in FY2017, owing to waning of favorable base effect."
 
In ICRA's view, available trends paint a broadly benign picture for wholesale food prices in the current month. This, in conjunction with the strengthening of the INR, may help to counteract the impact of factors such as rising crude oil prices on the overall WPI inflation for January 2018.
 
"We expect the WPI inflation to print in a range of 3.2% to 3.6% in Q4 FY2018, benefiting from the base effect. Therefore, the wedge between the CPI and the WPI inflation is expected to remain wide in the ongoing quarter," ICRA added.
 
Thus, WPI's print for January 2018 will be keenly watched for now CPI data has been released for the same month. CPI or retail inflation in January, eased to 5.07% - lower from  5.21% in December 2017.
 
However, the CPI was higher if compared with 3.17% of the corresponding month in the previous year.