Wholesale price inflation rises to 9-month high in December

India’s inflation rate based on the Wholesale Price Index (WPI) rose to a nine-month high of 0.73 per cent for December 2023 up from 0.26 in November, official data released on Monday showed.

The country’s WPI-based inflation had turned positive in November after sticking to negative territory for the preceding seven months.

The positive rate of inflation in December, 2023 is primarily due to increase in prices of food articles, machinery & equipment, other manufacturing, other transport equipment and computer, electronics & optical products, the Commerce ministry said.

The figures show a 9.38 per cent increase in wholesale food prices while those of the fuel group declined by (-) 2.14 per cent.

The retail inflation figures released earlier this month had shown a 5.69 per cent increase in December up from 5.55 per cent in November with higher food prices stretching household budgets.

Food inflation, which accounts for close to half of the overall consumer price index (CPI), shot up by 9.05 per cent from 8.657 per cent in November. The prices of vegetables, pulses, spices and fruits rose sharply during the month. However, there was some consolation in cooking oil prices declining during the month.

The RBI bases its monetary policy on the retail inflation figures.

Suman Chowdhury, Chief Economist and Head – Research, Acuité Ratings & Research said, “On expected lines, the WPI trajectory has continued to be benign at 0.73 per cent YoY in Dec-23 from 0.26 per cent YoY in Nov-23. While the slight annualised uptick is on account of the base factor, there is a sequential contraction by 0.9 per cent which is seasonally driven due to the softness in food articles.”

“The wholesale inflation for manufactured goods has persisted to be in the contractionary zone at -0.7 per cent YoY and at – 0.2 per cent MoM. It is the tenth successive month that manufacturing inflation has remained in a deflation mode. Further, the fuel and power category has also exhibited the same trend at – 2.4 per cent YoY and -0.7 per cent MoM. This indicates that input costs remain favourable for the industrial segment in the absence of a strong global demand.

“In the near term, the deflationary trend in manufactured goods is likely to remain. Overall WPI inflation print is expected to be shaped by the trend in the food category and in the absence of any major surprises, should remain range bound between 0 per cent -1.0 per cent,” said Chowdhury.