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In an indication that retail prices may cool down in the coming months, wholesale price index (WPI) based inflation fell to a three-month low of 3.58 per cent in December as vegetables became cheaper although fuel costs rose sharply.
WPI inflation was 3.93 per cent in November and much lower at 2.10 per cent in November 2016.
Similarly, the rate of inflation in the WPI Food Index also eased to 2.91 per cent in December, from 4.1 per cent in November, according to official data released on Monday.
WPI inflation in food articles cooled to 4.72 per cent as against 6.06 per cent in November. Vegetable prices also eased to 56.46 per cent in December as compared to 59.80 per cent in the previous month.
Inflation in protein rich eggs, meat and fish cooled to 1.67 per cent in December, while that in fruits spiked to 11.99 per cent.
However, wholesale prices of onions soared 197.05 per cent in December while fruits became costlier by 11.99 per cent.
Wholesale inflation in the fuel and power segment rose to 9.16 per cent in December from 8.82 per cent in the previous month. WPI inflation in manufactured items remained constant at 2.61 per cent.
In contrast, retail inflation soared to a 17-month high of 5.21 per cent in December as food items became more expensive.
Analysts attributed this to food inflation, and the impact of the higher housing inflation in the consumer price index based inflation.
“The dip in the inflation for primary food articles in the WPI for December 2017 may signal some correction in the CPI inflation for food items in the ongoing month,” said Aditi Nayar, Principal Economist, ICRA, adding that it also strengthens the case for a pause in the February 2018 policy review .
The Monetary Policy Committee will meet for its next meeting on February 6 and 7.
Industry is also hoping that the Union Budget 2018-19 to be presented next month will unveil measures to improve the agricultural supply chain network.
“We also look forward to the Union Budget to provide details on more specific measures towards strengthening of agriculture supply chain for effective management of food prices. We hope to see inclusion of petrol and diesel under the goods and services tax in coming months, which should also help in lowering the pressures of fuel inflation,” said Rashesh Shah, President, FICCI.
Meanwhile, inflation for October has been revised upwards to 3.68 per cent, from the provisional estimate of 3.59 per cent.
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