ICRA expects WPI inflation to rise above 4.0% in December

Food prices accelerate November WPI inflation

India's wholesale inflation hit a eight-month high, rising 3.93 percent during November, mainly due to increase in prices of onions, vegetables and fuel products.

The WPI inflation of food articles increased 6.06 per cent last month, against 4.30 per cent in October, while that of LPG rose by 31.3 per cent in November, against 26.53 per cent in the previous month.

"While vegetable prices may ease on a month-on-month basis going forward, primary food inflation on a year-on-year basis is nevertheless expected to rise further in the next two months, on account of the base effect related to the drop in vegetable prices from December 2016-February 2017", Nayar said.

The official WPI for all commodities (Base: 2011-12 = 100) for the month of November 2017 rose by 0.7 per cent to 116.3 from 115.5 for the previous month, according to the provisional data released by the Office of the Economic Adviser, ministry of commerce and industry. The government data released today showed that inflation in food articles more than doubled to 4.30 per cent in October.

Though wholesale prices are no longer monitored by the RBI for fixing interest rates, they provide an indication of possible trends in retail inflation.




Economists point out that the sharp increase in the inflation indices justify the cautious tone of the Reserve Bank of India (RBI) in its statement on last week's monetary policy which kept interest rates unchanged.

Protein rich eggs, meat and fish as a category, however, grew at a slower pace of 4.73 per cent during the month, against 5.76 in preceding month.

The MPC also said that that inflation expectations, i.e., food and fuel inflation, edged up in November.

Consumer inflation rose to a 15-month high of 4.88 per cent last month, up from 3.58 per cent in October. Elevated crude oil prices are likely to impart some firmness to the WPI inflation in the ongoing month.

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