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India’s wholesale inflation eases in November


India’s annual rate of inflation based on wholesale prices eased to 3.15 per cent for November from 3.39 per cent in the previous month, official data showed on Wednesday.

India's wholesale inflation eases in November
India's annual rate of inflation based on wholesale prices fell to 3.15 per cent for November

According to data on the wholesale price index (WPI) released by the Commerce and Industry Ministry, the annual inflation rate was (-)2.04 per cent in November last year.

A day earlier, the Central Statistics Office (CSO) reported that India’s annual retail inflation eased last month to 3.63 per cent from 4.20 per cent in October.

The decline in WPI was mainly due to a drop in the food articles prices to 1.54 per cent in November from 4.34 per cent in October.

The annual rate for onion on a year-on-year (YoY) basis was lower by (-)51.51 per cent. Overall, vegetable prices came down by (-)24.10 per cent.

In contrast, the inflation rate for potatoes on November-on-November basis stood at a 36.97 per cent, while that for pulses stood at 21.73 per cent.

Meanwhile, wheat became expensive by 10.71 per cent, and protein-based food items such as eggs, meat and fish became dearer by 5.82 per cent.

The expenses on primary articles, which constitute 20.12 per cent of the WPI’s total weight, rose by 1.25 per cent during November.

Prices of manufactured products, which comprise nearly 65 per cent of the index, continued to rise for the eighth straight month, rising by 3.20 per cent last month. The prices in this category had risen by 2.67 per cent in October.

The sub-category of manufactured food products, which includes sugar and edible oils, registered a rise of 10.73 per cent.

This was mainly caused by a spurt in sugar prices, which rose by 31.76 per cent as a result of production shortages. Edible oils rose by 3.98 per cent.

Similarly, fuel and power price inflation accelerated in November. It edged up by 7.07 per cent, as compared to a 6.18 per cent rise in October and 5.64 per cent in September.

Segment-wise, price of high-speed diesel rose by 19.26 per cent last month, while that for gasoline or petrol climbed by 5.54 per cent and LPG inched up by 1.80 per cent.

According to Harshavardhan Neotia, President of Ficci both the WPI and the CPI have been on a downward trajectory for the past three to four months on the back of softening in food prices.

“The outlook for agriculture sector growth this fiscal year is optimistic which will help keep food prices in check and will also support overall growth,” Neotia was quoted in a statement as saying.

“The latest IIP (Index of Industrial Production) numbers have reported a contraction and that persists to be a concern area. Both investment and consumption activity needs to be pushed at this juncture.”

The easing of key price indices makes the context favourable for a rate cut by the Reserve Bank of India (RBI) at its next monetary policy review due in February 2017.

“Ficci looks forward to a 50 bps cut in the repo rate in the near future,” the statement said.

Another business body — the Associated Chambers of Commerce and Industry of India (Assocham) stated that the fall in WPI is mainly driven by vegetables, potato and fruits.

“Assocham states that prices of products which are of national interest has been rising… policy makers should check and address through supply side responses,” said Assocham President Sunil Kanoria.

“Assocham states that though the RBI reduced the key policy rates in October 2016 to provide impetus to industry, but banning of specified bank notes casted a shadow on industrial outlook which has increased the burden further on producers to strive in the situation of over capacity along with slacking demand.”