India’s wholesale price index (WPI) inflation rose to a nine-month high of 0.73% in December from 0.26% the previous month owing to high food prices, as per data released by the commerce ministry on Monday.
The December print was also pushed up by the fading high base effect that had kept WPI deflationary for the first seven months of FY24. On a month-on-month basis, the overall index declined 0.9% in December, at the steepest pace in four months.
With the current print, WPI inflation has averaged (-)1.07% in April-December FY24 as against 11.69% in the comparable period of FY23. Among its three groups – ‘primary articles’ inflation has averaged 3.24% in April-December as against 12.61% in April-December FY23.
And that of ‘manufactured products’ and ‘fuel and power’ has averaged (-)1.85% and (-)5.74%, respectively, during the period as compared to 7.12% and 34.97% last year. In December, the inflation of ‘primary articles’ stood at 5.78%, ‘fuel and power’ at (-)2.41%, and ‘manufactured products’ at (-)0.71%.
Since in the first nine months of FY24, the ‘manufactured products’ group has stayed in the deflationary zone, there are no upside risks to core CPI inflation. The group carries 64% weight in the WPI basket and consists of several industrial input items used for making finished goods.
Currently, core CPI inflation, which comprises both goods and services in almost equal proportions, stands at 3.9%, the lowest in 48 months. CPI inflation, on the other hand, stands at a four-month high of 5.69% in December.
“The CPI-WPI gap narrowed to 5% (in December) after remaining at 5.3%-5.4% in the last three months. The gap is narrowing with the faster pickup in WPI led by food articles. With signs of easing emerging in key food culprits like vegetables and pulses, the gap could narrow further with a greater easing in CPI relative to WPI,” said Anitha Rangan, economist, Equirius Securities.
The uptick in ‘primary articles’ inflation was caused due to rise in vegetables and pulses inflation during December, but this was on low base as sequentially prices have fallen.
‘Fuel and power’ remained deflationary for the eighth consecutive month as prices of crude oil remain lower as compared to the previous year. In December, the price of India’s crude oil basket was down 0.8% on year, and 7.2% on month. Crude prices are seen range-bound around $80 a barrel in the coming months, thereby posing no immediate threat to either WPI or CPI.
CareEdge expects WPI inflation to remain around 1% for the remainder of this fiscal with continued easing in global commodity prices. “However, uncertainty surrounding the Kharif harvest, progress of Rabi sowing, geopolitical tensions in the middle-east, and global growth dynamics remain key,” said Rajani Sinha, chief economist, CareEdge.
Retail or consumer price based inflation (CPI) print for December rose to a 4-month high of 5.69 per cent, as per data released last week.