Wholesale inflation rises to 0.58 pc in Nov with onion remaining sore point

Wholesale inflation rose to 0.58 per cent in November mainly on account of rising prices of food articles, with onion alone spurting by over 172 per cent during the month vis-a-vis a year ago, government data showed on Monday.

The annual rate of inflation, based on monthly wholesale price index (WPI) was at 0.16 per cent in October.

The inflation was at 4.47 per cent in the same month a year ago (November 2018).

Build up inflation rate in the financial year so far was 2 per cent compared to a build up rate of 4.56 per cent in the corresponding period of the previous year, as per the data released by the Office of Economic Adviser, Ministry of Commerce & Industry.

 

Inflation in food articles as a group rose to 11.08 per cent during the month as against 9.80 per cent in the previous month, mainly driven by exorbitantly high onion prices, the rates of which spiked by over 172 per cent from a year-ago, the data showed.

Onion prices ruled between Rs 150-200 per kg in some markets in country till recently because of crop damage due to excessive rains. However, prices have started to move southwards at around Rs 100 per kg currently and are expected to come down further as fresh crop and imports are likely to hit the market soon.

Vegetables and pulses too got costly with inflation rates hovering at 45.32 per cent and 16.59 per cent respectively.

In non-food articles, the wholesale inflation in November stood at 1.98 per cent, lower than 2.35 per cent in October.

For manufactured products, the wholesale inflation remained static at (-) 0.84 per cent during the month under review. Fuel and power, as a category, too continued to show deflationary trend at (-)7.32 per cent as against (-)8.27 per cent.

The rate of price rise in primary articles as a grouping rose to 7.68 per cent from 6.41 per cent a month earlier.

Primary articles, which have a weightage of 22.62 per cent in the wholesale price index, broadly comprise of food articles, non-food articles, minerals and crude petroleum & natural gas components.

"As expected, a further spike in the inflation for primary food articles to a 71-month high 11.1 per cent, drove up the WPI inflation in November 2019, arresting the downtrend seen in the previous two months," ICRA Principal Economist Aditi Nayar said.

The core-WPI (minus food and fuel) displayed a year-on-year disinflation for the fourth consecutive month, the pace of which worsened to 1.9 per cent in November 2019, reiterating the weak demand conditions in the economy, she added.

Nayar said while the surge in vegetable prices will eventually reverse, the elevated inflation for pulses needs to be watched with caution, unless rabi sowing picks up pace.

"We continue to expect a pause in the next monetary policy review, based on the expectation that the CPI inflation will harden further in December 2019," she said.

The rate of inflation based on WPI Food Index, consisting of 'food articles' from 'primary articles' group and 'food product' from 'manufactured products' group, increased to 9.02 per cent in November from 7.65 per cent in October, the data showed.

Rahul Gupta, Head of Research-Currency, Emkay Global Financial Services said, "Overall, inflation is picking up in the economy, amid slow growth, this can be a sign of worry for the RBI at Feb policy."

However, inflation remained below the market consensus of 0.74 per cent, this indicates that few sectors including manufacturing are still under stress, he added.

Retail inflation, the key gauge for the Reserve Bank to arrive on its monetary policy decision every two months, hit over three-year high of 5.54 per cent in November due to costly food prices, led by onion, tomato as well as protein rich items meat, fish, eggs and fruits.

CARE Ratings expects WPI inflation to remain less than 1 per cent even though food inflation has been rising.

"This is so as the higher weight is in manufactured and fuel prices of over 75 per cent which will keep prices down as the inflation has been negative. While food inflation is around 11 per cent, there would be cooling off from January onwards which will keep wholesale price inflation under check," CARE Ratings said.