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NEW DELHI: India’s wholesale price index (WPI) for December 2021 eased marginally to 13.56% compared with the record-high of 14.23% last November, but remained in double digits for the ninth consecutive month. WPI is likely to stay in double digits for the rest of FY22, according to experts.

WPI in December 2021 was exponentially higher than the 1.95% of December 2020, primarily owing to a rise in the prices of mineral oils, basic metals, crude petroleum and natural gas, chemicals and chemical products, food products, textile and paper and paper products, the government said on Friday.

Milder inflation than the previous month in manufacturing, fuel and power sectors led to sequential softening in WPI, but high food prices kept the numbers elevated. Primary articles inflation at 13.38% in December 2021 is a 12-year high, said Sunil Kumar Sinha, principal economist, India Ratings and Research.

Wholesale price inflation is expected to have a downward trajectory for the remainder of FY22 as low-base effect wanes, but would remain above 10% for the rest of the fiscal, analysts at CareEdge said.

WPI would remain in double digits till March but the Omicron wave’s duration in India can prompt the monetary policy committee to raise repo rates at its next meeting in February, experts said.

“The duration of the current wave and the severity of restrictions will determine whether policy normalization (change in stance to neutral along with a hike in the reverse repo rate) can commence in April 2022 or should be delayed to June 2022," said Aditi Nayar, chief economist at ICRA.

“Once normalization commences, we expect two repo rate hikes of 25 basis points each, followed by a pause to reassess the durability of growth," she noted.

WPI inflation will be a worry for the government when it makes the Union budget as prices and their future trajectory will be part of all projections, Bank of Baroda’s chief economist Madan Sabnavis said.

The annual rate of inflation based on wholesale prices has been in double digits since the start of the fiscal, averaging 12.5% during April-December 2021, according to CareEdge.

Primary food inflation has spiked in just two months from the marginal 0.06% in October 2021 to a 23-month high of 9.6% in December 2021, reflecting the unfavourable base, chiefly for vegetables. Vegetable prices soared 31.56%, compared with a month-on-month rise of 3.91% in November.

“Part of the reason for such a rise in the prices of fruit and vegetables is the supply disruption caused by excessive rain in the southern parts of the country. In addition, cereals inflation rose to 5.1% in December 2021, a 22-month high," Sinha noted.

A large scale easing of year-on-year inflation for minerals, crude and natural gas compared with November gave some respite, partly reflecting the impact of the spread of Omicron on global commodity prices. A further softening of WPI could be on the cards, according to industry.

“As some stability in the prices of manufactured products has been observed in the recent weeks, we expect WPI inflation to soften by March 2022 with an improvement in the supply chain, rabi crops hitting the markets, and the vanishing low-base effect," said Pradeep Multani, president, PHD Chamber of Commerce and Industry.

Core WPI inflation rose by 0.3% to 11.0% in December 2021, easing to a six-month low even as global commodity prices corrected owing to the impact of Omicron. Domestic producers increased prices in various sectors to protect margins against the cumulative impact of the rise in input costs, Nayar noted.

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