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Modinomics succeeds in bringing WPI inflation down to 4.64%

A deeper disinflation in prices of primary food articles, easing of inflation related to crude petroleum and mineral oils and appreciation in the rupee on the landed prices of imports have brought inflation down

New Delhi: India’s wholesale inflation fell to a three-month low of 4.64% in November, driven down by the decline in prices of food articles, especially vegetables, and some easing in rates of petroleum products.

The Wholesale Price Index (WPI)-based inflation stood was 5.28% in October and 4.02% in November last year.

Food articles witnessed softening of prices with deflation at 3.31% in November, against 1.49% in October, government data released Friday showed.

Vegetables, too, became cheaper with deflation at 26.98% in November, compared to 18.65% in the previous month.

Inflation in the ‘fuel and power’ basket in November continued to rule high at 16.28% but was lower than 18.44% in October. This was on account of lowering of prices of petrol and diesel, following a decline in global crude oil prices.

Separately in petrol and diesel, inflation was 12.06% and 20.16%, respectively, and for liquefied petroleum gas (LPG), it was 23.22% during October.

ICRA Principal Economist Aditi Nayar said the easing of the WPI inflation was led by a deeper disinflation in prices of primary food articles, easing of inflation related to crude petroleum and mineral oils following the correction in retail fuel prices, and some impact of the appreciation in the rupee on the landed prices of imports.

“The recent trend of a year-on-year correction in food prices does not augur well for the strength of rural demand in the immediate term. However, factors such as weak post-monsoon rainfall and a delay in rabi sowing pose some uncertainty regarding how long food prices would remain in the disinflation zone,” Nayar said.

Nayar said with the recent stability in the crude oil prices and the rupee, ICRA expects the WPI inflation to range between 3.7-4.4% in the remainder of the second half for current fiscal.

Among food articles, potato prices continued to rule high with 86.45% inflation in November. While onion witnessed deflation of 47.60%, the same for pulses stood at 5.42%.

The October inflation at 4.64% is the lowest in three months, and a lower inflation than this was last seen in August at 4.62%.

CARE Ratings, in its analysis, said it expects WPI inflation to remain in the range of 4.5-5% for the rest of the year, and will be above the CPI rates.

The WPI inflation for September, however, has been revised upwards to 5.22%, from the provisional estimate of 5.13%.

Data released earlier this week showed that the retail or consumer price index-based inflation for November also fell to a 17-month low at 2.33%.

The Reserve Bank of India (RBI) mainly takes into account retail inflation data while formulating monetary policy.

In its fifth monetary policy review for the fiscal, released last week, the Reserve Bank kept interest rates unchanged but held out a promise to cut them if the upside risks to inflation do not materialise.

The central bank lowered retail inflation projection to 2.7-3.2% for the second half of the current fiscal, citing normal monsoon and moderate food prices.

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