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Food prices pushed producer inflation, based on Wholesale Price Index (WPI), into positive territory in November, data released by Commerce & Industry Ministry on Thursday showed.
The latest print was 0.26 per cent, as against the negative 0.52 per cent of October. The last positive WPI inflation was recorded in March at 1.41 per cent. The November number is an eight-month high. However, experts do not foresee much rise in WPI-based inflation during the coming months.
It may be noted that food prices, especially vegetables and fruits, pushed Consumer Price Index (CPI)-based retail inflation to three months of 5.5 per cent in November.
As core inflation in both WPI and CPI has continued to be lower, there is no possibility of a change in the stance of the Monetary Policy Committee, which has maintained a pause in policy rate so far. This means interest rates, neither on loans nor on deposits, are expected to move upwards anytime soon.
According to the Commerce & Industry Ministry, the positive rate of WPI-based inflation in November 2023 is primarily due to an increase in prices of food articles, minerals, machinery & equipment, computer, electronics & optical products, motor vehicles, other transport equipment, and other manufacturing, etc.
Food inflation spiked to 8.18 per cent in November, up from 2.53 per cent in October. Inflation in onion zoomed 101.24 per cent in November, from 62.60 per cent in the previous month.
The government last week banned exports of this kitchen staple till March next year in a bid to increase domestic availability and contain prices, which skyrocketed to ₹80/kg in the retail market. It expects prices to cool to ₹40/kg by January.
Inflation in vegetables was 10.44 per cent, compared to (-)21.04 per cent in October. In paddy and fruits, inflation was 10.44 per cent and 8.37 per cent, respectively. Inflation in potatoes remained low at (-)27.22 per cent in November.
During the month, inflation in manufactured products stood at (-)0.64 per cent, fuel and power at (-)4.61 per cent, and non-food articles at (-)3.20 per cent.
Barclays Research said the magnitude of the increase in wholesale food prices was more than in retail food prices, indicating wholesalers did not pass through the entire price rise to consumers. This may be reflected in elevated retail food prices in December unless supply, particularly of vegetables, increases.
Commenting on the latest inflation, Rajani Sinha, Chief Economist with CARE, felt the latest number is in line with expectations. Even while deflation in manufacturing products and fuel and power segments continued, a sharp pick-up in wholesale food inflation along with the fading base effect pushed WPI inflation into the positive territory.
”For the remainder of FY24, we expect a subdued WPI inflation to stay below 2%. Upside risks could emanate from food price pressures. However, the expected deflationary trend in the manufacturing segment, aided by lower metals prices and a sharp correction in global crude oil prices, would limit any significant upward movement in the WPI index,” she said.
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