New Delhi- The wholesale price-based inflation declined to a 22-month low of 4.95 per cent in December 2022, mainly due to fall in prices of food articles, especially vegetables, on easing supply side pressure and a higher base of last year.

This is the seventh straight month of declining Wholesale Price Index (WPI)-based inflation.

It was 5.85 per cent in November 2022 and 14.27 per cent in December 2021.

Even though declining prices of vegetables and onions pulled down inflation rate of food articles, wheat, pulses and potato remained expensive, along with protein-rich items like milk and ‘egg, meat and fish’.

Inflation in food articles during December 2022 was (-)1.25 per cent. Inflation in vegetables and onion was (-)35.95 per cent and (-)25.97 per cent, respectively.

In non-food articles, oilseeds and minerals too recorded a decline in inflation by 4.81 per cent and 2.93 per cent, respectively.

“The decline in the rate of inflation in December 2022 is primarily contributed by fall in prices of food articles, mineral oils, crude petroleum & natural gas, food products, textiles and chemicals & chemical products,” the commerce and industry ministry said in a statement.

The last low level of WPI inflation was recorded in February 2021 at 4.83 per cent.

The deceleration in WPI comes in line with retail inflation data released last week, which showed CPI inflation eased to 5.72 per cent in December. The consumer price index (CPI)-based inflation remained within the RBI’s upper tolerance limit of 6 per cent for the second month in a row.

India Ratings and Research Principal Economist Sunil Kumar Sinha said easing of supply side pressure, especially with respect to fruits and vegetables, along with a favourable base effect helped in moderation of wholesale inflation.

“Due to high base effect and softening of global commodity prices, the wholesale inflation is expected to come in around 3.1 per cent in the March quarter of FY’23,” Sinha said.

As per data released on Monday, WPI inflation in fuel and power rose marginally from 17.35 per cent in November to 18.09 per cent in December 2022, while in manufactured products it softened to 3.37 per cent last month.

WPI inflation in crude petroleum & natural gas cooled to 39.71 per cent in December, against 48.23 per cent in the previous month.

Core inflation too declined to 25-month low of 3.2 per cent in December 2022 due to lower input cost, especially of commodities.

Barclays MD & Head of EM Asia (ex-China) Economics Rahul Bajoria said similar to CPI, WPI is also losing momentum, driven by both base effects and falling food prices.

“We expect further declines in import costs to keep WPI contained in the coming months, but CPI pass through may be limited for now,” Bajoria said.

Geojit Financial Services Chief Investment Strategist V K Vijayakumar said the significance of the downtrend in CPI and WPI inflation is that it will enable the monetary policy committee to pause after one more, say, a 25-basis point rate hike in February.

“Therefore, higher rates will not impact the growth recovery underway in the economy now,” he said.

Ladderup Wealth Management Managing Director Raghvendra Nath said with signs of easing inflation, it will be a tough task for RBI to decide on the trajectory of interest rates in next monetary policy meeting.

The RBI’s monetary policy committee is scheduled to meet on February 6-8 to decide on the policy interest rate. The RBI has so far hiked rates by 2.25 percentage points since May, with the latest 35 basis point hike in December, 2022.  (PTI) 


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