Wholesale inflation falls to five-month low of 3.15% in November

K R Srivats New Delhi | Updated on January 16, 2018 Published on December 14, 2016

bl15_WPI chart


Demonetisation lowers price of perishables

The wholesale price index (WPI)-based inflation for November 2016 came in at a five-month low of 3.15 per cent against 3.39 per cent in the previous month. In November 2015, WPI inflation had contracted 2.04 per cent.

The September WPI inflation has been revised from 3.57 per cent to 3.8 per cent, official data released on Wednesday showed.

Food articles inflation — which accounts for 14 per cent of WPI — in November 2016 came in at 1.54 per cent, lower than 5.55 per cent in the same month last year.

Owing to the cash crunch arising from demonetisation, vegetables inflation contracted 24.10 per cent in November 2016 against 13.25 per cent increase in the same month last year.

The index for fuel and power — with weight of 14.91 per cent — rose by 1.8 per cent.

Manufactured products inflation — which has a weightage of 65 per cent on WPI — came in at 3.2 per cent in November 2016. In the same month last fiscal, it had contracted 1.42 per cent.

Under manufactured products, sugar prices shot up 31.76 per cent in November 2016 against contraction of 11.22 per cent.

Commenting on the latest WPI print, Harshavardhan Neotia, President, FICCI, said both WPI and CPI have been on a downward trajectory for the past three to four months on the back of softening food prices, which is an encouraging trend.

Farm sector optimism

The outlook for agriculture sector growth this fiscal year is optimistic which will help keep food prices in check and will also support overall growth, he said .

Both investment and consumption activity needs to be pushed at this juncture and FICCI looks forward to a 50 bps cut in the repo rate in the near future, Neotia said .

Nikhil Gupta, Economist, Motilal Oswal Financial Services Ltd, said: “Although headline WPI-inflation is the lowest in the past five months, non-food manufacturing WPI (so-called core WPI) inflation was the highest in two years.

“Excluding vegetables (which account for less than 2 per cent in WPI), WPI-inflation actually moved up from 3.8 per cent year-on-year to 4.1 per cent last month. Cash crunch in November may have to led to a crash in vegetable prices since these items are perishable in nature. This is not different from what was reflected in CPI.”

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Published on December 14, 2016
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