December wholesale inflation slips to 22-month low of 4.95%

The Wholesale Price Index for December 2022 fell to a 22-month low of 4.95 percent 5.85 percent in the preceding month and 14.27 percent in the year-ago period, data released by the government showed on Monday. It was also lower than the CNBC-TV18 poll projection of 5.57 percent.

Wholesale inflation measures the changes in price of goods that wholesale businesses sell to and trade in bulk with other businesses. The index tracks factory gate prices before retail prices, unlike consumer price index (CPI), which tracks prices of goods and services purchased by consumers.

Analysts polled by CNBC-TV18 had suggested WPI would come in the range of 5.45 percent to 5.8 percent for December. It shall ease due to high base and moderation in input prices, they said.

December WPI core inflation came in at 3.2 percent while analysts had estimated it to soften to 2.8 percent versus 3.9 percent month-on-month.

Giving the specifics the Department for Promotion of Industry and Internal Trade said, the annual rate of inflation of fuel & power of WPI rose from 17.35 percent in November to 18.09 in December, annual rate of inflation of primary articles group of WPI declined from 5.52 percent in Nov to 2.38 percent in Dec, annual rate of inflation of manufactured products group of WPI declined from 3.59 percent in Nov 2022 to 3.37 in Dec and the rate of inflation based on WPI food index decreased from 2.17 percent in Nov 2022 to 0.65 percent last month.

It must be noted that for the first time in November, WPI dropped to a single digit level after a gap of almost 19 months. Rupa Rege Nitsure, Chief Economist, L&T Financial Services then said there was sequential easing in global energy as well as non-energy prices and statistical base was also favourable. “But the disruption caused by vegetable prices etc, in the month of September, which also reduced in October, led to easing of food inflation that contributed to this relatively benign inflation for WPI.”

Last week, Reserve Bank of India (RBI) governor Shaktikanta Das said that core inflation in India is an area of concern and the central bank needs to be very vigilant of it.

"Although the momentum of core inflation has moderated, it remains sticky at 6%," Das said in a discussion at the Business Today Banking and Economic Summit. "That is not a comfortable number to deal with. So therefore we have to be very vigilant and we have to really keep focus on the core part of inflation."

His comments came after India's annual retail inflation rose 5.72 percent in December from 5.88 percent in the previous month. Core inflation, which excludes volatile food and fuel components, was estimated at 6.1 percent, according to two economists cited by news agency Reuters, versus 6 percent and 6.26 percent in November.