Wholesale price-based inflation slowed to 1.22 per cent in December on lowering of food prices, according to government data released on Thursday.
Retail inflation based on the Consumer Price Index (CPI) was 6.93 per cent in November.
Inflation based on Wholesale Price Index (WPI) was 1.55 per cent in November 2020, and 2.76 per cent in December 2019.
The rate of inflation based on WPI Food Index decreased from 4.27 per cent in November 2020 to 0.92 per cent in December 2020, according to the data released by the Department for Promotion of Industry and Internal Trade.
Additionally, retail inflation had also dropped sharply to 4.59 per cent in December, on the back of declining food prices.
WPI is used to gauge average change in price of sale of goods or services in bulk by the wholesaler and consumer price index (CPI) measures the change in the price in sale of goods or services in retail or it measures price of goods or services sell directly to consumers.
“The fall in WPI is a good sign, however, what needs to come down is retail inflation. The recent upward move in crude prices can be a potential dampener. Also, on the back of banks still recovering from high NPAs, it remains to be seen if the RBI will continue to hold interest rates. Given the weak transmission, we continue to see high liquidity but low credit offtake due to poor consumer demand. Hence, once the pent up demand is exhausted, it will be critical to ensure demand upswing to see the real benefit of moderate inflation,” said Sanjay Kumar, chief executive officer and managing director, Elior India.