India’s WPI Inflation Eases To A Four-Month Low
Vendors sell fruit and vegetables next to trucks in the Burrabazar area of Kolkata, India, on Tuesday, Sept. 22, 2020. Photographer: Arko Datto/Bloomberg

India’s WPI Inflation Eases To A Four-Month Low

Wholesale inflation in India fell to the lowest in four months as a decline in prices of food articles offset an increase for manufactured products.

Inflation, as measured by the Wholesale Price Index, stood at 1.22% in December compared with 1.55% in November, according to data released by the Ministry of Commerce and Industry on Thursday. A Bloomberg poll of 20 economists had pegged WPI inflation at 0.85%.

Core WPI inflation, that is non-food manufacturing, rose to 4.1% in December, a two-year high from 2.6% in November, according to a research note by IDFC First Bank. The rise was led by higher basic metals, followed by chemicals and textiles. Core inflation, excluding basic metals, was also higher at 2.7% in December compared to 1.7% last month, the note said.

“The rise in core WPI inflation could add to upside pressure on core CPI inflation. However, excess capacity conditions will limit pass-through to retail prices,” said Gaura Sen Gupta, economist at IDFC First Bank.

Retail inflation in India fell to 4.59% in December from 6.93% in November, led by a collapse in vegetable prices. That brought the CPI inflation back within the Monetary Policy Committee’s target range of 4 (+/-2)% for the first time since March 2020.

Inflation Internals In December 2020:

  • Primary articles inflation contracted 1.61% compared to an increase of 2.72% in November.

  • Prices of food articles contracted 1.11% after rising 3.94% last month.

  • Prices of non-food articles rose 3.13% against a rise of 8.43% in the previous month.

  • Fuel and power index contracted 8.72% against a fall of 9.87% in November.

  • Manufactured products inflation rose 4.24% compared with an increase of 2.97% in November.

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