The wholesale price index (WPI) rose an annual 8.43% in December on higher food prices, as per government data. The figure compared with the median forecast for an 8.35% rise in a Reuters poll and was higher than the annual rise of 7.48% in November, which was its lowest level in a year.
The annual reading for October was upwardly revised to 9.12% from 8.58%.Meanwhile, India's annual industrial output had slumped to 2.7% in November from 11.3% growth in the prior month. Annual food inflation in December accelerated to 13.55% from 9.41% in the prior month, following a rise in prices of onions and other vegetables. Vegetable prices have risen more than 70% in the past year in India, prompting the government to curb exports and ease import restrictions on all essential commodities. The current level of food inflation in India is not acceptable, Finance Minister Pranab Mukherjee acknowledged. The Reserve Bank of India (RBI) has repeatedly noted overall inflation continues to be above comfortable level, and its head has said the central bank's pause in its monetary tightening cycle was a "comma and not a full stop". The central bank raised key lending and borrowing rates six times last year, and is widely expected to raise rates by 25 basis points each again when it reviews policy on January 25. According to Jehangir Aziz of JPMorgan, RBI may lose the plot if it does not act aggressively at this point in time.
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