India's wholesale inflation stepped out of the deflationary zone for the first time since March 2023 as it rose to 0.26 percent in November, data released by the commerce ministry on December 14 showed. Wholesale Price Index (WPI) inflation was at -0.52 percent in October 2023 and 6.12 percent in November 2022.
At 0.26 percent, the latest wholesale inflation print is the highest in eight months.
The WPI data comes two days after the statistics ministry said the headline retail inflation rose to a three-month high of 5.55 percent in November, still down 189 basis points from the 15-month high of 7.44 percent in July. Wholesale inflation has zoomed 149 basis points over the same period.
One basis point is one-hundredth of a percentage point.
Like the Consumer Price Index, the WPI too rose by 0.5 percent month-on-month in November, driven by a 1.9 percent rise in the food index. Within food, the biggest push, as expected, came from vegetables, with a 16.5 percent month-on-month surge in price index, thanks to a 41.3 percent jump in the index of onions. Other food items to register a sequential increase in price included fruits (up 1.7 percent), wheat (1.6 percent), and pulses (1.4 percent), jacking up the wholesale food inflation to 4.69 percent in November from 1.07 percent in October.
At the same time, prices of manufactured products changed little, with their index rising a mere 0.1 percent MoM. Keeping manufactured products' inflation in check was price weakness in key raw materials, with the price index for semi-finished steel down 1.5 percent MoM and that of basic metals 0.9 percent lower compared to October. Even among finished items, leather and related products saw their prices decline by 0.6 percent MoM, while those of pharma and rubber and plastic products were down 0.3-0.4 percent.
Prices of manufactured products, which make up nearly two-thirds of the WPI basket, have been steady for three months in a row now.
Despite rising above zero in November, average WPI inflation for the first eight months of 2023-24 remains in the negative territory, standing at -1.33 percent. And while it is expected to rise further in the coming months, economists widely see it averaging around 1 percent for the year as a whole. This could spell trouble for the country's nominal GDP growth, which the 2023-24 Budget assumed would be 10.5 percent while making its tax collection and other forecasts.
As per latest data, nominal GDP growth in the first half of 2023-24 was just 8.6 percent.
However, Chief Economic Advisor V Anantha Nageswaran has suggested that it is possible India's is underestimating its GDP growth rate. "It is a theoretical possibility that when you have a tax buoyancy which is as high as 1.9 or close to 2, which is historically unprecedented, then it is quite possible that we are not measuring the economy's underlying momentum and activity and dynamism as we should be," Nageswaran had said on November 30.
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