New Delhi, Jan 15: Lower food prices pulled India’s annual rate of inflation based on wholesale prices to a three-month low of 3.58 per cent in December, official data showed on Monday.
As per data furnished by the Ministry of Commerce and Industry, the Wholesale Price Index (WPI) -based inflation, with the revised base year of 2011-12, was 3.93 per cent in November.
However, the WPI-based inflation rate in December 2017 was higher than 2.10 per cent reported for the corresponding month of the previous year.
“Build-up inflation rate in the financial year so far was 2.21 per cent compared to a build-up rate of 3.71 per cent in the corresponding period of the previous year,” the ministry said in a statement.
On a sequential basis, the expenses on primary articles, which constitute 22.62 per cent of the WPI’s total weightage, edged higher by 3.86 per cent, from an increase of 5.28 per cent in November.
The prices of food articles rose by 4.72 per cent from an acceleration of 6.06 per cent in the previous corresponding month.
On a year-on-year (YoY) basis, food prices in December rose by 4.72 per cent from a rise of only 0.07 per cent.
In terms of individual items, onion prices soared higher by 197.05 per cent, whereas for potatoes it plunged by (-)8.40 per cent.
In contrast, the overall vegetable prices in November rose by 56.46 per cent, against a fall of (-)26.88 per cent in the same month a year ago.
Further, the data revealed that wheat became cheaper by (-)8.47 per cent on YoY basis and the prices of pulses came down by (-)34.60 per cent, but paddy became dearer by 3.19 per cent.
On the other hand, protein-based food items such as eggs, meat and fish became expensive by 1.67 per cent during the month.
Prices of the other major group under the WPI, manufactured products, which comprise nearly 64.23 per cent of the index, recorded a 2.61 per cent rise.
The sub-category of manufactured food products registered a decline of (-)0.23 per cent.
Fuel and power prices accelerated by 9.16 per cent.
Product-wise, the price of high-speed diesel rose by 12.68 per cent during December while that of petrol climbed by 8.80 per cent and for LPG by 21.14 per cent.
According to industry body Ficci, moderation in WPI-based inflation “has come primarily owing to lower food prices”.
“The easing of inflation is a positive sign and continued efforts of government to strengthen food supply mechanism can help in bringing down food inflation further,” said Ficci President Rashesh Shah.
“As the inflation numbers are being driven largely on account of supply side factors, we urge the Reserve Bank of India to calibrate its monetary policy stance giving equal weightage to growth consideration.”
Another industry chamber — Assocham — stated that despite likely seasonal softening of prices, inflation is expected to “remain high till first quarter of FY19”.
“The policymakers need to take care of the continuous rise in the petrol and high speed diesel prices due to rise in global crude oil prices which may have an impact on import bills and subsequent impact on exchange rates,” said Assocham Secretary General D.S. Rawat.
“Besides, it may have negative impact on input prices for industry which has already started to feel pressure on its profitability.”
Ratings agency ICRA’s Principal Economist Aditi Nayar was quoted in a statement as saying that: “The divergence in the sequential trend in the CPI and WPI inflation in December 2017 was driven by food inflation, and the impact of the higher housing inflation, which was limited to the CPI.”
“The dip in the inflation for primary food articles in the WPI for December 2017 may signal some correction in the CPI inflation for food items in the ongoing month.”
Kotak Mahindra Bank’s Senior Economist Upasna Bhardwaj said: “The (Reserve Bank of India) MPC (monetary policy committee) may prefer to maintain a status quo, at least through 1HCY18, as it gets more clarity on monsoon and sustainability of high crude oil prices post the winter squeeze.”
Inflationary risks had forced the RBI to hold its key lending rate unchanged for the third time in a succession at 6 per cent in its penultimate bi-monthly monetary policy review of the fiscal last month.
The RBI is expected to conduct the final monetary policy review for 2017-18 in February.