WPI inflation declines to 3-month low of 1.89% on cheaper food

New Delhi: The annual inflation rate based on the all-India Wholesale Price Index (WPI) eased to 1.89% in November, down from 2.36% in October, driven by lower food prices.

This marks a significant shift from the same period a year ago when WPI inflation was 5.85%.

According to data from the ministry of commerce and industry, the decline in WPI inflation was primarily driven by a sharp drop in the prices of key commodities such as petroleum products, food and manufactured goods.

WPI, a proxy for producers’ prices, has been positive since November 2023.

To be sure, the fact that the inflation rate remained in positive territory in November was primarily because of high prices in the food and manufacturing sectors.

Food prices declined to 8.63% in November from 13.54% in October, according to data released by the ministry of commerce and industry.

The decline was helped by a fall in vegetable prices, which stood at 28.57% as against 63.04% in October. Inflation in potatoes, however, continued to be high at 82.79%, while for onions it fell sharply to 2.85% in November.

Year-on-year (y-o-y) inflation for primary articles moderated to 5.49% in November from 8.09% in October, the data showed.

Primary articles reflect the price movements of raw or unprocessed goods that are used for manufacturing or consumption.

“WPI inflation eased to 1.9% in November 2024 from 2.4% in October, driven by a moderation in food inflation, which fell to 8.9% from 11.6%. Vegetable inflation saw the largest decline, dropping to 28.6% from 63%, with onions and tomatoes showing significant price moderation. While cereal inflation remained steady, pulses saw a decrease. Wheat inflation accelerated for the third straight month, while paddy inflation stayed stable. Globally, wheat and paddy prices also saw faster declines,” said Sonal Badhan, economist, Bank of Baroda.

The fuel and power category witnessed a deflation of 5.83% in November, against a deflation of 5.79% in October.

In manufactured items, inflation was 2% in November, against 1.50% in October. Mineral oil prices increased by 0.72% in November, while electricity prices decreased marginally by 0.07%.

As per Consumer Price Index data released last week, retail inflation moderated to 5.5% in November, compared with 6.2% in October.

Barclays said this is within the tolerance band of 2-6% of the Reserve Bank of India’s (RBI) monetary policy committee (MPC), indicating that CPI inflation will be drifting closer to the 4% target by March 2025.

“We expect the MPC to cut the policy repo rate by 25bps in its February meeting. We are mindful of the almost new-looking MPC that will be in charge of this decision,” Barclays said.

The government appointed a new RBI governor earlier this month. Former revenue secretary Sanjay Malhotra took over as the 26th RBI governor on 11 December, replacing Shaktikanta Das.

In October, the government had reconstituted the six-member MPC.

Icra Ltd senior economist Rahul Agrawal said the moderation in WPI inflation was primarily led by primary food articles, which eased to a three-month low of 8.6% from 13.5% in the previous month, exerting downward pressure on the headline print to the tune of 91 bps between these months.

Icra expects the headline WPI inflation to rise to 2.5-3% in December.

PTI contributed to this story.