Moneycontrol
Last Updated : Dec 14, 2017 01:32 PM IST | Source: Moneycontrol.com

November wholesale inflation at 3.93% vs 3.59% in October

Wholesale inflation rate, measured by WPI, is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices.

India's wholesale inflation hit a eight-month high, rising 3.93 percent during November, mainly due to increase in prices of onions, vegetables and fuel products.

Wholesale inflation rate, measured by WPI, is a marker for price movements in bulk buys for traders and broadly mirrors trends in shop-end prices.

WPI recorded 3.59 percent jump in October and 1.82 percent in November, a year ago.

Latest price data released by the Commerce Ministry today showed that food prices, especially vegetables, onions, eggs and fruits continued to rise, with price rise in petrol, diesel pulling up the inflation level.

Food prices, especially wheat, pulses, potatoes, oilseeds and non-food articles continued to fall. However, price of onion—a key ingredient used in Indian kitchen--more than doubled in November as compared with a contraction (-)55.32 percent during the same period a year ago.

Surging onion prices, which is currently retailing around Rs 65 a kg in some markets, has pushed up kitchen budgets. Unseasonal rains have affected supplies of the summer-sown (kharif) onion crop this year, pushing up retail prices. Last month the government allowed state-owned agencies to buy onions from overseas markets, to bolster local supplies and keep a check on shop-end prices of the commonly-used bulb in most Indian curries.

Tomato, another widely consumed vegetable across the country, has also turned costly, due to supply disruption in Karnataka, a leading catchment production area of the pulpy vegetable.

Vegetable prices grew nearly 60 percent in November, as compared with a contraction of (-) 17.31 percent last year. “The spike in vegetable prices led by onions and tomatoes was the chief factor that pushed up the primary food inflation to the 16 month high 6.1 percent in November,” Aditi Nayar, Principal Economist at ICRA said.

“While vegetable prices may ease on a month-on-month basis going forward, primary food inflation on a year-on-year basis is nevertheless expected to rise further in the next two months, on account of the base effect related to the drop in vegetable prices from December 2016-February 2017,” Nayar said.

Prices of pulses continued to slump for close to a year now at (-) 35.48 percent.

Fuel and power inflation, which has a weightage of 13.15 percent in WPI, stood at 8.82 percent in November, compared with 11.81 percent in October and 2.11 percent a year ago. Petrol prices grew 10.57 percent in November from 17.91 percent a month ago, with liquefied petroleum gas (LPG) prices witnessing 31.30 percent jump from nearly 18.17 percent rise in October.

Primary articles, which account for more than a fifth of the entire wholesale price index grew 5.28 percent in November from 3.33 percent in October and 1.34 percent a year ago.

Earlier this week, data released by government showed that retail inflation increased sharply to a 15-month high at 4.88 percent in November, mirroring a similar trend. Prices at retail level also grew due to an increase in prices of vegetables and fuel.

Similarly, factory output witnessed a tepid growth of 2.2 percent in October as compared with a 4.1 percent year-on-year increase in September owing to subdued demand, which is a result of rollout of the new indirect tax system-Goods and Services Tax (GST).

Inflation numbers are crucial as higher-than-expected price rise give lesser room for a rate cut by the central bank to boost investment and accelerate growth in the broader economy that has shown signs of revival in the last few months.

Last week, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) forecasted that retail inflation will hover around the range 4.3-4.7 percent in quarter ended December and March, higher than the previous projection of 4.2-4.6 percent.

The MPC also said that that inflation expectations, i.e., food and fuel inflation, edged up in November. Inflation expectations of households surveyed by the Reserve Bank have already firmed up and any increase in food and fuel prices may further harden these expectations.
First Published on Dec 14, 2017 12:37 pm
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