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November WPI inflation at nine-month high even as food prices moderate

November WPI inflation at nine-month high even as food prices moderate

By Administrator_India

Capital Sands

The wholesale price index-based inflation rate rose to a nine-month high of 1.55 per cent in November even as the rate of food price rise narrowed substantially to 3.94 per cent from 6.37 per cent in October.

In fact, onion, which bore the brunt of rising inflation rate in recent months, saw deflation or fall in prices in November at the rate of 7.58 per cent.

November was the fourth month in a row with WPI inflation. Before that there was deflation or fall in prices for months at a stretch.

Within food inflation, all the important vegetable prices rose by 12.24 per cent in November, which was almost half the rate of 25.23 per cent in the previous month.

However, the potato inflation rate rose to 115.2 per cent in November against 107.70 per cent the previous month.

Fruits witnessed fall in prices for the fifth month in a row at 3.80 per cent in November.

Aditi Nayar, principal economist at ICRA, said,”the decline in the WPI food inflation in November 2020 partly reflected the correction in vegetable prices, as well as a high base, which will persist in December 2020.”

Moreover, the outlook for the rabi season appears bright, with sowing four per cent higher than year-ago levels, 77 per cent of last year’s area already sown, and reservoir levels remaining healthy by historical standards, she said.

Pulses still saw the inflation rate at elevated level at 13.04 per cent in November, albeit lower than 15.93 per cent in the previous month.

In non-food primary articles, oilseeds saw the inflation rate going up to 8.29 per cent in November from 4.36 per cent in the previous month.

“The extent of the downtrend in the primary food inflation in the ongoing month may be tempered by the further hardening in prices of edible oils, and to a smaller extent pulses,” said Nayar.

Fuel and power category continued to see deflation with prices of petrol, diesel and liquefied petroleum gas all declining in November.

The inflation rate in manufactured items, which have the highest weight of 64 per cent in WPI, increased to 2.97 per cent from 2.12 per cent. Even food items here which are processed ones basically rose to 4.95 per cent from 4.53 per cent.

Core inflation, which basically relates to non-food manufactured items, rose to a 22-month high of 2.6 per cent in November.

Within non-food manufactured items, basic metals saw inflation rate rising to 7.16 per cent from 5.32 per cent and mild, semi-finished steel to 6.65 per cent from 4.85 per cent.

Sanjay Kumar, CEO and MD Elior India, said the increasing trend in WPI inflation is essentially a mixed bag. “At one end, hopefully the price rise is on the back of increased demand and not because of increase in input cost for manufacturing because that would be a cause of concern as it would mean that the logistics and supply chain cost are driving inflation.”

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