Dec wholesale inflation marginally quickens to 3.39 percent

Moneycontrol bureau

India’s wholesale inflation rate grew 3.39 percent in December, marginally quicker than November’s 3.15 percent, although there were signs that demonetisation has hurt sales in the country’s main trade markets in some categories including food.

On an annualised basis, wholesale inflation rose even more sharply from (-)1.06 percent in December 2015.

Food inflation, however, recorded a sharp year-on-year fall at (-) 0.70 percent in December 2016 from 7.89 percent in the same month of 2015.

Wholesale inflation rates, measured by the wholesale price index (WPI), is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices.

Data released last week showed that India’s retail inflation rate grew 3.41 percent in December from November’s 3.63 percent, confirming fears of weak demand as households, hit by a demonetisation-induced cash crunch, put off spending.  

Wholesale price data reinforces similar trends in some product groups, showing the negative effect of restricted cash on bulk purchase of vegetables, food and other items which, that are mostly transacted in cash.

Vegetable prices slumped (-) 33.11 percent last month from a 19.51 percent growth in December 2015 and (-) 24.10 percent in November 2016.

The index for `primary articles’, which accounts for more than a fifth (20.11 percent) of the entire wholesale price index, barely grew 0.27 percent in December 2016, a sharp deceleration compared to 4.58 percent growth in the same month of 2015.

This appears primarily due to the impact of demonetisation with prices of fruits and vegetables, pulses, gram, and poultry chicken growing at a slower clip.

Fruit prices barely grew in the mandis in December at 0.04 percent, compared to a fall of (-)0.55 percent in December 2015 and a 2.45 percent growth in November 2016.

The slide in onion prices continued, with wholesale inflation rate falling for the widely consumed bulb falling (-) 37.20 percent in December from an 18.32 percent jump in December last year. It had fallen (-) 51.51 percent in November.

The pace of potato price rise, also appears to have slowed down—to 26.42 percent in December from 36.97 percent in November. Prices had plunged (-)35.40 percent in December last year following a glut in the commonly used vegetable.