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Led by a spike in food prices, especially pulses, consumer price index (CPI)-based inflation for November rose to 5.41 per cent, from 5 per cent in October.
Consumer food price inflation, which has a weightage of about 47 per cent in the retail inflation index, spiked to 6.07 per cent in November from a level of 1.13 per cent in November 2014. It was at 5.25 per cent in October.
The Reserve Bank of India, which is now only guided by the CPI in its monetary policy decisions, should take notice of this food inflation reading before resorting to further policy rate cuts next year, said economists.
WPI at (-)1.99% Costlier food prices — especially onion and pulses — also had an impact on the wholesale price index (WPI), which moved up to (-) 1.99 per cent in November from (-) 3.81 per cent in the previous month.
The uptick in headline WPI was primarily on account of food inflation, which moved up to 5.22 per cent from 2.44 per cent. Food articles have a weightage of about 14 per cent in the wholesale price index.
The wholesale price index remained in negative territory for the thirteenth month in a row. Last November, WPI-based inflation had touched (-) 0.17 per cent.
Experts’ take Aditi Nayar, Senior Economist, ICRA, said that the pace of contraction of the WPI index eased significantly in November.
This was due to all the major sub-indices recording higher inflation (primary food articles, primary non-food articles and manufactured food products) or narrower disinflation (minerals, fuel & power, manufactured non-food products).
In the short term, the imminent rate hike by the US Federal Reserve as well as concerns related to the global growth outlook may continue to exert pressure on commodity prices, she said.
The impact of the same may, however, be partly offset by a weakening of the Indian rupee relative to the US dollar.
“With the further softening of crude oil prices in the ongoing month, we expect headline and core WPI inflation to print at sub-zero levels in the next two months,” she added.
Richa Gupta, Senior Director, Deloitte in India, said that pulses were the “main culprit” in the food basket with prices moving up by 4.39 per cent over the last month despite the Centre’s efforts to tame the price rise.
“Overall, we expect the headline WPI number to move into positive territory over the next three months as the base effect fades away. Expect the RBI to remain vigilant on the food inflation front and maintain a status quo at least up till the Budget,” she added.
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