India's wholesale inflation remains in positive territory; 0.73% in December
Jan 15, 2024
New Delhi [India], January 15 : Wholesale inflation in India, based on the Wholesale Price Index, remained in positive territory for the second month after remaining in the negative zone for the seventh straight month until October.
Data released by the Ministry of Commerce and Industry on Monday afternoon showed India's wholesale inflation in December stood at 0.73 per cent, against 0.26 per cent in November.
The ministry noted that the positive rate of inflation in December was primarily due to an increase in prices of food articles, machinery and equipment, other manufacturing, other transport equipment, and computer, electronics, and optical products.
Economists say a little rise in wholesale inflation is good as it typically incentivizes goods manufacturers to produce more.
In April this year, the wholesale inflation went into negative territory. Similarly, in the initial days of COVID, in July 2020, the WPI was reported as negative.
Overall wholesale inflation was 8.39 per cent in October 2022 and has fallen since then. Notably, the wholesale price index (WPI)-based inflation had been in double digits for 18 months in a row till September last year.
The government releases index numbers of wholesale prices on a monthly basis on the 14th of every month (or the next working day). The index numbers are compiled with data received from institutional sources and selected manufacturing units across the country.
Meanwhile, retail inflation in India rose at its fastest pace in four months in December 2023, largely due to a spike in cereals, products and eggs. Sub-index for vegetables; meat and fish declined substantially.
Retail inflation or Consumer Price Index December came at 5.69 per cent in December, against 5.55 per cent in November. The October consumer price index (CPI) was at 4.87 per cent and 5.02 per cent in September.
The retail inflation in India though is in RBI's 2-6 per cent comfort level but is above the ideal 4 percent scenario.
The higher month-on-month retail inflation comes close on the heels of RBI having maintained the status quo in the repo rate for the fifth straight occasion, besides flagging concerns on the inflation outlook.
Barring the recent pauses, the RBI has raised the repo rate by 250 basis points cumulatively since May 2022 in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
The RBI meanwhile maintained India's retail inflation projections for 2023-24 at 5.4 per cent, with Q3 at 5.6 per cent and Q4 at 5.2 per cent. CPI inflation for Q1:2024-25 is projected at 5.2 per cent; Q2 at 4.0 per cent; and Q3 at 4.7 per cent, with risks evenly balanced.
