Wholesale Inflation Worsens To 2.59% In December: 10 Things To Know

Food wholesale inflation was at 11.05 per cent in December as against 9.02 per cent in the previous month, the data showed.

Wholesale Inflation Worsens To 2.59% In December: 10 Things To Know

Wholesale inflation is the rate of increase in wholesale prices gauged by the Wholesale Price Index

Wholesale inflation worsened to 2.59 per cent in December from 0.58 per cent in the previous month, government data showed on Tuesday. The official data on wholesale inflation - or the rate of increase in wholesale prices gauged by the Wholesale Price Index - was released a day after separate data showed consumer inflation came in at 7.35 per cent last month - the worst reading recorded since July 2014. Worsening inflation figures dashed hopes of further monetary easing by the Reserve Bank of India (RBI) in the near term, say analysts.

Here are 10 things to know about inflation:

  1. Food wholesale inflation was at 11.05 per cent in December as against 9.02 per cent in the previous month, the data showed. That reading was based on the WPI Food Index comprising food articles from the primary articles group and food products from the manufactured products category.

  2. A spike in the prices of onion and potato over the past few weeks pushed the overall wholesale inflation higher, say analysts. 

  3. “Wholesale based inflation has been in a downtrend since the beginning of financial year 2019-20. However, in WPI surged in December as onion prices have been jumping since late September,” said Rahul Gupta, head of research-currency at Emkay Global Financial Services.

  4. Among food articles, vegetable prices surged 69.69 per cent mainly on account of soaring onion and potato prices, inflation in which came in at 455.83 per cent and 44.97 per cent respectively, the data showed.

  5. “WPI along with retail inflation (CPI) may stop the Monetary Policy Committee from cutting the repo rate in February.”

  6. Consumer inflation breached the RBI's medium-term target of 4 per cent for a third straight month, according to separate official data released the previous day.

  7. The Reserve Bank of India - which tracks consumer consumer inflation data primarily for formulating its monetary policy - reduced the repo rate by 135 basis points in 2019 but kept it on hold in a surprise move in December citing concerns about inflation.

  8. However, investors remain hopeful of a possible rate cut in April after the union budget on February 1 and as inflation starts to moderate as per the central bank's projections.

  9. The economy is struggling against the slowest pace of expansion in more than six years, due to weak consumption and thousands of job cuts amid weakness across sectors. 

  10. The government has forecast a GDP growth rate of 5 per cent for the economy in the financial year ending in March 2020, which marks the slowest pace of expansion in 11 years.



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