India’s wholesale inflation accelerated to 2.37 per cent on an annual basis in December from 1.89 per cent in November even as food prices see marginal change.
A poll by Reuters had indicated India’s WPI to be at 2.3 per cent.
Biggest jump was observed for primary articles inflation as it touched to 6.02 per cent, from 5.49 per cent in November. Marginal change was observed for food inflation in December. It touched to 8.89 in December, from 8.29 per cent in November with vegetable prices climbing 28.65 per cent year-on-year, marginally up from a 28.57 per cent rise in the previous month.
Fuel and power contracted at a slower pace in December at 3.79 per cent as against (-) 5.83 per cent in November. Prices of manufactured products, which account for about 64 per cent of the wholesale price index, increased 2.14 per cent from a 2 per cent increase in the previous month.
Onion inflation expanded significantly to 16.81 per cent in December as against 2.85 per cent in November. However, potato inflation touched 93.20 for this month, up against 82.79 per cent in November.
India’s retail inflation eased to 5.22 per cent in December from 5.48 in November. Inflation breached the RBI’s 6 per cent upper tolerance band in October.
The WPI measures the price of a representative basket of wholesale goods. In India, wholesale price index is divided into three groups: Primary Articles (22.6 percent of total weight); Fuel and Power (13.2 percent); and Manufactured Products (64.2 percent).
As a significant portion of 1.4 billion people spend most of their income on food, India’s inflation index is heavily influenced by food prices. Experts had earlier indicated that a higher food inflation number could keep overall inflation from declining significantly.
RBI on inflation
RBI’s Monetary Policy Committee (MPC) in December downgraded its growth forecast for this fiscal year to 6.6 per cent from 7.2 per cent, while increasing its inflation estimates to 4.8 per cent from 4.5 per cent for the same period, highlighting concerns over food inflation.The MPC retained its neutral stance, signalling room for potential rate cuts if inflationary pressures ease in the coming months.
Food inflation is expected to remain elevated through the third quarter of FY25 before showing signs of moderation in the fourth quarter, former RBI Governor Shaktikanta Das said in his statement during the MPC meeting. “High inflation reduces the disposable income in the hands of consumers,” he added.
Das noted that increasing incidents of weather events, financial volatility and geopolitical developments pose upside risks to inflation.
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