Food prices in December push WPI inflation to 9-month high

Price of pulses in the wholesale market in December 2023 was 19.6% higher when compared with the same month previous year. Paddy became costlier by 10.54%, milk by 6.95%, fruits by 4.85% and vegetables by 26.30% year-on-year during the month under review.

 New Delhi: Wholesale price inflation rose to 0.73 per cent in December, the highest level in nine months, due to a sharp jump in food prices even though prices of fuel, power and manufactured products contracted on a year-on-year basis, as per official data released on Monday. 

Wholesale food inflation surged to 9.38 per cent in December 2023 as against a deflation of 1.02 per cent recorded in the same month previous year. Onion price surged by 91.77 per cent year-on-year. 

Price of pulses in the wholesale market in December 2023 was 19.6 per cent higher when compared with the same month previous year. Paddy became costlier by 10.54 per cent, milk by 6.95 per cent, fruits by 4.85 per cent and vegetables by 26.30 per cent year-on-year during the month under review. However, potatoes, wheat, eggs, meat and fish became cheaper during this period, the data released by the Union Ministry of Commerce & Industry showed. 

The Wholesale Price Index (WPI) based inflation was in the negative zone in seven out of the first nine months of the current financial year. After remaining in the deflationary zone for seven consecutive months, WPI inflation increased to 0.26 per cent in November. 

“Despite fading from a supportive base, WPI inflation is expected to remain range bound around 1 per cent for the remainder of this fiscal with continued easing in global commodity prices,” said Rajani Sinha, Chief Economist at CareEdge Ratings. 

“However, uncertainty surrounding Kharif harvest, progress of Rabi sowing, geopolitical tensions in the Middle-East, and global growth dynamics remain key monitorables,” she added. 

India Ratings & Research expects the wholesale inflation to come in at 1.1 per cent in January. 

“However, in view of retail inflation still being higher than RBI’s comfort level, India Ratings and Research expects RBI to maintain a pause of the policy rate in the near term,” said Sunil Kumar Sinha, Principal Economist at India Ratings & Research. 

As per data released by the National Statistical Office (NSO) last week, the Consumer Price Index (CPI) based retail inflation jumped to a four-month high of 5.69 per cent in December, led by a 9.53 per cent surge in food inflation. 

Rise in food prices is the key reason for the jump in both retail and wholesale price inflation. 

Core WPI remained in a deflationary zone for the 10th consecutive month as decline in input costs, especially commodities prices, helped bring down prices of manufactured items. Manufactured products witnessed deflation of 0.71 per cent in December, while fuel and power prices declined by 2.41 per cent year-on-year during the month under review.